ECN 440 Lecture Notes - Brady Bonds, Wharton School Of The University Of Pennsylvania, Robert J. Shiller

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Creation of the imf and the world bank. Each country set a fixed value of its currency in terms of the us$ (par values), and the us$ fixed its value in terms of gold (1 ounce of gold = us) Official exchange rate was determined by the par values of the two currencies. If 0. 5 pound = us; 200 yen = us; then this implies 0. 5 pound = 200 yen or 1 pound to 400 yen. Convertibility of us$ into gold on demand: limited to us federal reserve and other member central banks (not to general public) Four serious problems in the 1920s and 1930s: Trade should be open in all countries. Nations should not discriminate against other nations. Countries should not limit the buying and selling of currency when its purpose is to pay for imports. Exchange rates should be fixed but with possibility of periodic adjustment.

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