abhishreshthaa
New member
Fixed Exchange Rate System ( Bretton Woods System)
Problem in Bretton Woods System
- Introduced in 1944
- Birth of IMF
- US$ convertible into gold at a fixed parity of $35 per ounce
- Other member countries of IMF agreed to fix the parity of their currency vis-a-vis dollar with variation 1% on either side
Problem in Bretton Woods System
- The system was abolished in 1971 and was later succeeded by floating exchange rate system
- As US Balance of Payments deficit started mounting and in 1971 convertibility was completely abandoned
- World liquidity was not keeping pace with the growth in world trade