Question

What is meant by the Bretton Woods Agreement?

Answer 1

In the industrial world, the main objective of the post-war international economic system was to preserve full employment and economic stability. The World Bank and the International Monetary Fund (IMF) are referred to as sometimes the Bretton Woods twins or the Bretton Woods institutions.

• At Bretton Woods in New Hampshire (USA), in July 1944, a framework was agreed upon at the United Nations Monetary and Financial Conference.
• As per the agreement at Bretton Woods conference, to finance postwar reconstruction, the International Bank for Reconstruction and Development (popularly known as the World Bank) was established.
• To deal with deficits of its member nations and external surpluses, the International Monetary Fund (IMF) was established at the Bretton Woods Conference.
• The Bretton Woods system is often referred to as the post-war international economic system.
• In 1947, the World Bank and the IMF commenced their financial operations.
• For making key decisions in the World Bank and International Monetary Fund (IMF), USA has the veto powers.
• The system linking the monetary system and national currencies is the international monetary system.
• The fixed exchange rates were the basis of the Bretton Woods System.
• The Bretton Woods system unleashed an era of rise in trade and incomes in Japan and Industrial nations in Western world.
• The dependency on the World Bank and IMF reduced as Japan and European countries rebuilt their economies.
• Hence developing countries started receiving more attention from the Bretton Woods Institutions from the late 1950’s.
• Western industrial powers control the decision making in these institutions.