Bretton Woods Agreement


DEFINITION of 'Bretton Woods Agreement'

A landmark system for monetary and exchange rate management established in 1944. The Bretton Woods Agreement was developed at the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire, from July 1 to July 22, 1944.

Major outcomes of the Bretton Woods conference included the formation of the International Monetary Fund and the International Bank for Reconstruction and Development and, most importantly, the proposed introduction of an adjustable pegged foreign exchange rate system. Currencies were pegged to gold and the IMF was given the authority to intervene when an imbalance of payments arose.


Loading the player...

BREAKING DOWN 'Bretton Woods Agreement'

One of the proposals of the Bretton Woods conference was that currencies should be convertible for trade and other current account transactions.

Following the end of World War II in 1945, Europe and the rest of the world embarked on a lengthy period of reconstruction and economic development to recover from the devastation inflicted by the war. Although gold initially served as the base reserve currency, the U.S dollar gained momentum as an international reserve currency that was linked to the price of gold.

  1. International Monetary Fund - IMF

    An international organization created for the purpose of standardizing ...
  2. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  3. Functional Finance

    A heterodox macroeconomic theory developed by Abba Lerner during ...
  4. Smithsonian Agreement

    An agreement reached by a group of 10 countries (G10) in 1971 ...
  5. Nixon Shock

    A term used to describe the actions taken by former U.S. President ...
  6. World Trade Organization - WTO

    An international organization dealing with the global rules of ...
Related Articles
  1. Economics

    The US Will Remain the World's Reserve Currency

    Learn why the U.S. dollar is not in any danger of losing its reserve currency status and understand how China is pushing the yuan to be a reserve currency.
  2. Economics

    Understanding the Bretton Woods Agreement

    The Bretton Woods Agreement is a famous international monetary agreement that came out of a meeting of the UN Monetary and Financial Conference.
  3. Forex Education

    Currency Exchange: Floating Rate Vs. Fixed Rate

    Baffled by exchange rates? Wonder why some currencies fluctuate while others are pegged? This article has the answers.
  4. Forex Education

    Dollarization Explained

    Find out how fledgling economies can find some stability in their currency and attract foreign investment.
  5. Fundamental Analysis

    An Introduction To The International Monetary Fund (IMF)

    Chances are you've heard of the IMF. But what does it do, and why is it so controversial?
  6. Economics

    The Stock Market: A Look Back

    The past century was marked by furious economic change. What can it tell us about what lies ahead?
  7. Forex Education

    Forex Tutorial: The Forex Market

    In this online tutorial, beginners and experts alike can learn the ins and outs of the retail forex market.
  8. Investing

    Latin America’s Economic Forecast

    After a ten-year run, the economies of Latin America are in a decline. For sustainable, long-term growth, the region needs structural reforms.
  9. Economics

    Why the Euro Failed to Become the World's Reserve Currency

    Examine the current state of the U.S. dollar as the world's reserve currency; learn the major reasons why the euro has failed to replace it in that capacity.
  10. Forex Education

    The Most Famous Forex Traders Of All Time

    The five most famous forex traders share common virtues such as strong self-confidence.
  1. How is the International Monetary Fund financed?

    The International Monetary Fund (IMF) is primarily financed through quota contributions from its member countries. The IMF ... Read Full Answer >>
  2. What is the difference between International Monetary Fund and the World Bank?

    The primary difference between the International Monetary Fund, or IMF, and the World Bank lies in their respective purposes ... Read Full Answer >>
  3. What is the purpose of the International Monetary Fund?

    The stated goals of the International Monetary Fund include offering policy advice to member governments and central banks; ... Read Full Answer >>
  4. What countries have the largest gold reserves?

    The United States holds the largest stockpile of gold reserves in the world by a considerable margin. In fact, the U.S. government ... Read Full Answer >>
  5. How did John Maynard Keynes influence business cycle theory?

    John Maynard Keynes created the theoretical arguments for a new type of economic strategy: government intervention used to ... Read Full Answer >>
  6. How does the balance of payments impact currency exchange rates?

    A change in a country's balance of payments can cause fluctuations in the exchange rate between its currency and foreign ... Read Full Answer >>
  7. What do Keynes and Freidman have to do with fiscal and monetary policy?

    British economist John Maynard Keynes and American economist Milton Friedman were two of the most influential economic and ... Read Full Answer >>
  8. What was the Gold Reserve Act?

    The Gold Reserve Act of 1934 gave the government the power to peg the value of the dollar to gold and adjust it as it pleased. ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!