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The Missing Bretton Woods Debate over Flexible Exchange Rates

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  • Douglas A. Irwin

Abstract

The collapse of the gold standard in the 1930s sparked a debate about the merits of fixed versus floating exchange rates. Yet the debate quickly vanished: there was almost no discussion about the exchange rate regime at the Bretton Woods conference in 1944 because John Maynard Keynes and Harry Dexter White agreed that exchange rate stability through fixed but adjustable pegs was the right approach. In light of the difficult macroeconomic tradeoffs experienced under the gold standard a decade earlier, the outright rejection of floating exchange rates seems surprising. This paper explores the views of leading economists about the exchange rate provisions in the Bretton Woods agreement and examines why arguments for floating exchange rates were so quickly dismissed.

Suggested Citation

  • Douglas A. Irwin, 2017. "The Missing Bretton Woods Debate over Flexible Exchange Rates," NBER Working Papers 23037, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23037
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    References listed on IDEAS

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    1. Cesarano,Filippo, 2006. "Monetary Theory and Bretton Woods," Cambridge Books, Cambridge University Press, number 9780521867597, October.
    2. repec:bla:scandj:v:78:y:1976:i:2:p:169-96 is not listed on IDEAS
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    6. Benn Steil, 2013. "The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order," Economics Books, Princeton University Press, edition 1, volume 1, number 9925.
    7. Filippo Cesarano, 2003. "Defining fundamental disequilibrium: Keynes's unheeded contribution," Journal of Economic Studies, Emerald Group Publishing, vol. 30(5), pages 474-492, October.
    8. Boyer, Russell S., 2009. "Reflections on Milton Friedman's contributions to open economy money/macro," Journal of International Money and Finance, Elsevier, vol. 28(7), pages 1097-1116, November.
    9. Frank D. Graham, 1949. "Exchange Rates: Bound Or Free?," Journal of Finance, American Finance Association, vol. 4(1), pages 13-27, March.
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    Cited by:

    1. Edward Nelson, 2020. "The Continuing Validity of Monetary Policy Autonomy under Floating Exchange Rates," International Journal of Central Banking, International Journal of Central Banking, vol. 16(2), pages 81-123, March.
    2. Giovanni Ferri, 2022. "General overview of the first 50 years of Economic Notes, 1972–2021," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 51(S1), December.

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    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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