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Bretton Wood system (HINDI)

International monetary system prevailed during 1945 - 1976 is also known as the Bretton Wood system. As the United Nation's Monetary and Financial Conference was held in Bretton Wood, New Hampshire, USA, the agreement that came out of this conference is called Bretton Wood Agreement. Conference was held to take stock of situation resulted from the devastation of World War II and complete collapse of gold standard as the international monetary system. Classical gold standard was collapse with beginning of World War I but during inter-war period efforts were made to revive it but the classical gold standard could not be restored. So at this point of time there was almost a total absence of the monetary system that would facilitate international trade. Two institutions were created by the BW agreement - International Bank for Reconstruction and Development (IRBD) and International Monetary Fund 9IMF). The latter was to put in place an international monetary system. Member countries were to contribute to the IMF their agreed quota. Each member country would be represented in the Board and the voting power would be according the amount their respective quota. .system put in place was following: US$ was accepted as the payment currency for international transactions as US has agreed to exchange the $ with gold at a fixed rate (1 ounce of gold = $1). all the member countries were required to declare the exchange rate of their currencies in terms of $. This exchange rate was supposed to remain fixed. Countries would not devalue their currencies without the approval from the board which could be accorded in very restrictive conditions. Virtually it initiated an era of fixed exchange rate. As $ became acceptable currency US has very liberally imported the goods resulting in the accumulation of its short term liabilities abroad. Us had issued $ in excess of what its gold reserves would allowed it to issue. Its domestic expenditure too have increased substantially. It was engaged in Vietnam War that made it spend more. In view of these developments US in 1971 has announced that it would no longer abide by its pledge of $ convertibility. The decision is termed as Nixon (the US President) shock. Latter in 1976 in Jamaica conference floating exchange rates were formally accepted, thus bringing the BW system to an end. #YOUCANLEARNECONOMICS #ECONOMICS Subscribe me @    / ezclassesfaghsa   Like me on Facebook @   / faghsa   Follow me on Twitter @ https://twitter.com/?lang=en