Bretton Woods and the U.S. Decision to Intervene in the Foreign-Exchange Market, 1957-1962

Abstract

The deterioration in the U.S. balance of payments after 1957 and an accelerating loss of gold reserves prompted U.S. monetary authorities to undertake foreign-exchange-market interventions beginning in 1961. We discuss the events leading up to these interventions, the institutional arrangements developed for that purpose, and the controversies that ensued. Although these interventions forestalled a loss of U.S. gold reserves, in the end, they only delayed more fundamental adjustments and, in that respect, were a failure.

Keywords: Bretton Woods, Exchange Stabilization Fund, Federal Reserve System, foreign-exchange rates, intervention

JEL Classification: F3, N1, N2