Fed in Print

Abstract

The Bretton Woods international financial system, which was in place from roughly 1949 to 1973, is the most significant modern policy experiment to attempt to simultaneously manage international payments, international capital flows, and international currency values. This paper uses an international macroeconomic accounting methodology to study the Bretton Woods system and finds that it: (1) significantly distorted both international and domestic capital markets and hence the accumulation and allocation of capital; (2) significantly slowed the reconstruction of Europe, albeit while limiting the indebtedness of European countries. Our results also provide support for the utility of the accounting methodology in that it finds a sharp change in the behavior of domestic and international capital market wedges that coincides with the breakdown of the system.

Lee E. Ohanian & Paulina Restrepo-Echavarria & Diana Van Patten & Mark L. J. Wright, Bretton Woods and the Reconstruction of Europe, Federal Reserve Bank of St. Louis, Working Papers 2019-30, 13 Oct 2019.

JEL Classification:

E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

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