EC249 Lecture Notes - Lecture 3: Bretton Woods System
Document Summary
First war ended in 1918 post war boom very prosperous. 1929 great depression large declines in investment loss of jobs . Downward pressure on consumption: gold standard was reintroduced various times, net exports. To increase net exports you should depreciate currency. Exports go up because goods and services are cheaper. Imports go down because you foreign goods cost more. Interwar period was marked by substantial economic unrest. Lots of inflation a race to the bottom. Post 1944 solution by policy makers of major economies. Us fixes currency in terms of gold ( us dollars per 1once of gold) All countries part of the bretton woods system agreed to keep exchange rates based on dollar reserves. If there are pressures on central exchange rate, banks step in and keep domestic currencies similar to dollar exchange. If you lose confidence in dollar, you will go exchange your dollars for gold.
