Exchange Rate Arrangements

Abstract

The history of the international monetary arrangements of the last one hundred years begins with the gold standard and continues with the gold exchange standard of the period between the two world wars, and then with the Bretton Woods system of the 1950s and the 1960s.¹ Each of these three periods when currencies were pegged has been followed by a period when many of the curriencies of the larger countries were not pegged. The first period of floating exchange rates began when the British authorities stopped pegging the pound to the US dollar in March 1919 and ended when the French franc was again pegged to gold in December 1926.^{2, 3} The second period of floating exchange rates began in September 1931 when the British authorities stopped pegging the British pound to gold and ended with the beginning of Second World War; in the early 1930s a number of countries followed Great Britain either at the same time, or in the next few months.⁴ The third period of floating exchange rates began in February 1973, when the German authorities stopped pegging the mark to the US dollar; within a few days, the authorities in most other industrial countries also stopped pegging their currencies.