Economics Exchange Rate Systems Questions
The Bretton Woods system was a monetary system established in 1944 at the Bretton Woods Conference. It aimed to create a stable international monetary system by fixing exchange rates to the US dollar, which was pegged to gold. Under this system, countries agreed to maintain their exchange rates within a narrow band and intervene in foreign exchange markets to maintain the fixed rates. The International Monetary Fund (IMF) was also created to oversee the system and provide financial assistance to countries facing balance of payments problems. However, the Bretton Woods system collapsed in 1971 when the US abandoned the gold standard, leading to floating exchange rates and the current system of flexible exchange rates.