Bretton Woods Agreement

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Exchange Rate

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

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

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

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

    An international organization dealing with the global rules of ...
  6. Floating Exchange Rate

    A country's exchange rate regime where its currency is set by ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  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 >>
Related Articles
  1. 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.
  2. Forex Education

    Dollarization Explained

    Find out how fledgling economies can find some stability in their currency and attract foreign investment.
  3. 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?
  4. 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?
  5. 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.
  6. Forex Strategies

    Can Forex Trading Make You Rich?

    Forex trading may be profitable for hedge funds or unusually skilled currency traders, but for average retail traders, forex trading can lead to huge losses.
  7. Investing

    Is It Time To Buy Commodities?

    Despite the news, the Athens Stock Exchange is down less than 5 percent year-to-date, while the Shanghai Composite remains up more than 10 percent.
  8. Forex Fundamentals

    Understanding the Floating Exchange Rate

    Floating exchange rate is the exchange rate between two currencies at any given time.
  9. Investing News

    Who Are The Biggest Winners From The Greek 'No'?

    Greece’s non-acceptance of the bailout plan has created some winners for European and other global investors to put their money to work.
  10. Economics

    Confused How The IMF, World Bank, & WTO differ?

    From loans to Athens and trade deals in Asia to economic reports on the world’s most successful and most troubled economies, these organizations make headlines across the globe

You May Also Like

Hot Definitions
  1. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  2. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  3. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  4. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  5. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  6. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
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!