Black Gold: The End of Bretton Woods and the Oil Price Shocks of the 1970s
26 Pages Posted: 31 Mar 2003
The authors explore the connection between the 1971 - 1973 breakdown of the Bretton Woods Agreement and the rapid run-up in the (US) dollar price of oil in 1973 and 1974. Although both episodes are usually discussed in textbook presentations, they are not linked, either coincidentally or causally. In this paper, the authors argue that gold-buying and oil-selling countries, with price-setting power, would respond to changes in the dollar price of gold in a predictable and rational fashion. In times of rapidly increasing (decreasing) dollar prices of gold, we would expect rapidly increasing (decreasing) dollar prices of oil. This is, in fact, what was observed after the collapse of the Bretton Woods Agreement.
JEL Classification: N20, A22
Suggested Citation: Suggested Citation