The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries

11 Pages Posted: 12 Mar 2004 Last revised: 21 Nov 2013

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: March 2004

Abstract

In this paper we explore some implications of the revived' Bretton Woods system for exchange market intervention and reserve management in periphery countries. Financial policies in these countries are seen as a component of a more general portfolio management policy in which the formation of an efficient domestic capital stock is a key objective. Because intervention in financial markets is an important part of their development strategy, intervention in exchange and financial markets has, and we argue will continue to be, large and persistent enough to generate predictable deviations of exchange rates and relative yields in industrial country financial markets from normal cyclical patterns. We argue that management of the currency composition of international reserves by emerging market governments and central banks is unlikely to alter these conclusions.

Suggested Citation

Dooley, Michael P. and Folkerts-Landau, David and Garber, Peter M., The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries (March 2004). NBER Working Paper No. w10332. Available at SSRN: https://ssrn.com/abstract=515225

Michael P. Dooley (Contact Author)

University of California at Santa Cruz ( email )

Santa Cruz, CA 95064
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David Folkerts-Landau

Deutsche Bank, London ( email )

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National Bureau of Economic Research (NBER)

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Peter M. Garber

Brown University - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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