What is the 'Bretton Woods Agreement?

'

The Bretton Woods Agreement is the landmark system for monetary and exchange
rate management established in 1944. It was developed at the United
Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire,
from July 1 to July 22, 1944. Under the agreement, currencies were pegged to the
price of gold, and the U.S. dollar was seen as a reserve currency linked to the price
of gold.

BREAKING DOWN 'Bretton Woods Agreement'

The Bretton Woods Agreement remains an important part of world financial history.
The creation of the International Monetary Fund (IMF) and valuation of gold and
foreign exchange rates remain important to this day. The agreement also made
currencies convertible for trade and other current account transactions. The strong
value of the U.S. dollar eventually led to the collapse of this system after more than
20 years.

The Bretton Woods Agreement

Delegates from 44 countries met to create a new international monetary system.

The main goals of the meeting of the 730 delegates were to ensure a foreign
exchange rate system, prevent competitive devaluations and promote economic
growth.

Preparation for this event took two years. The primary designers of the system were
John Maynard Keynes, of the United Kingdom, and Harry Dexter White, the chief
international economist of the Treasury Department. Keynes plan was to establish a
global central bank called the Clearing Union. Whites plan limited the powers and
resources of each country. In the end, the adopted plan took ideals from both,
leaning more toward Whites plan.

Creation of Two New Institutions

One of the major items that came about from the Bretton Woods Agreement was
the creation of the International Monetary Fund. The IMF was created to monitor
exchange rates and lend reserve currencies to nations. It was formally introduced in
December 1945 when 29 members signed the Articles of Agreement. The Bretton
Woods Agreement also created the World Bank Group, which was set up to provide
financial assistance for countries during the reconstruction post World War I phase.

End of Bretton Woods Agreement

The Bretton Woods Agreement was dissolved between 1968 and 1973. An
overvaluation of the U.S. dollar led to concerns over the exchange rates and tie to
the price of gold. President Richard Nixon called for a temporary suspension of the
dollars convertibility. Countries were then free to choose any exchange agreement,
except the price of gold. In 1973, foreign governments let currencies float, which
put an end to the Bretton Woods system.

Bachelors IN Business
Administration
FACULTY OF FINANCE DEPARTMNT
University of Central Punjab

Submitted By
Malik Shan 0014

khizer rehman 0039

Khizer farooq 0004

Topic
BRETTON WOODS AGREEMENT

Lecturer
Professor Mubashir Iqbal