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Black Gold: The End of Bretton Woods and the Oil Price Shocks of the 1970s

26 Pages Posted: 31 Mar 2003  

David Hammes

University of Hawaii - Department of Economics

Douglas Wills

University of Washington, Tacoma - Department of Business Administration

Abstract

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

Hammes, David and Wills, Douglas, Black Gold: The End of Bretton Woods and the Oil Price Shocks of the 1970s. Available at SSRN: https://ssrn.com/abstract=388283

David Hammes

University of Hawaii - Department of Economics ( email )

Hilo, HI 96720-4091
United States

Douglas T. Wills (Contact Author)

University of Washington, Tacoma - Department of Business Administration ( email )

1900 Commerce Street, Box 358420
Tacoma, WA 98402-3100
United States
253-692-5626 (Phone)
253-692-4424 (Fax)

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