An Essay on the Revived Bretton Woods System

11 Pages Posted: 21 Sep 2003 Last revised: 1 Oct 2022

See all articles by Michael P. Dooley

Michael P. Dooley

University of California at Santa Cruz; National Bureau of Economic Research (NBER)

David Folkerts-Landau

Deutsche Bank, London; National Bureau of Economic Research (NBER)

Peter M. Garber

Brown University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: September 2003

Abstract

The economic emergence of a fixed exchange rate periphery in Asia has reestablished the United States as the center country in the Bretton Woods international monetary system. We argue that the normal evolution of the international monetary system involves the emergence of a periphery for which the development strategy is export-led growth supported by undervalued exchange rates, capital controls and official capital outflows in the form of accumulation of reserve asset claims on the center country. The success of this strategy in fostering economic growth allows the periphery to graduate to the center. Financial liberalization, in turn, requires floating exchange rates among the center countries. But there is a line of countries waiting to follow the Europe of the 1950s/60s and Asia today sufficient to keep the system intact for the foreseeable future.

Suggested Citation

Dooley, Michael P. and Folkerts-Landau, David and Garber, Peter M., An Essay on the Revived Bretton Woods System (September 2003). NBER Working Paper No. w9971, Available at SSRN: https://ssrn.com/abstract=447259

Michael P. Dooley (Contact Author)

University of California at Santa Cruz ( email )

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David Folkerts-Landau

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Peter M. Garber

Brown University - Department of Economics ( email )

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