The Bretton Woods system established fixed exchange rates postWorld War II from "summary" of International Financial Management, Abridged Edition by Jeff Madura
Following World War II, the Bretton Woods system was established to stabilize the global financial system. This system aimed to prevent the competitive devaluations and protectionist policies that had contributed to the Great Depression. One of the key features of the Bretton Woods system was the fixed exchange rates it put in place. Under this system, participating countries agreed to peg their currencies to the U.
S. dollar, which was convertible to gold at a fixed rate. This fixed exchange rate regime provided stability and predictability in international trade and investment, as it eliminated the uncertainty associated with fluctuating exchange rates.
The U.
S. dollar was chosen as the anchor currency due to the economic strength of the United States at the time. Other countries pegged their currencies to the dollar, which in turn was tied to gold at $35 per ounce. T...
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