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


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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.
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Subject headings:
Keywords: Bretton Woods; International Payments; Capital Flows
DOI: 10.20955/wp.2019.030
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