International adjustment and finance since Bretton Woods

Abstract

The international monetary system has undergone a considerable evolution over the past 50 years. The system that was created at the conference of Bretton Woods in 1944 lasted for roughly half of this period. Since the early seventies important changes have occurred which have modified the system in a number of ways, the most far-reaching being the switch-over from fixed, but adjustable, exchange rates to floating, but partially managed, exchange rates among the major currencies. Although the system of international adjustment and finance is now markedly different from that prevailing in the first 25 years after the Second World War, a number of basic elements have remained broadly the same. In particular, the general aim has remained to operate an open world-trade and payments regime based on a large degree of international cooperation. Despite the fact that the role of the International Monetary Fund, designed in Bretton Woods as the fulcrum of the system, has been modified quite substantially over the decades, it is widely accepted that the basic principles upon which it was established are still valid and that there is a continuing need for the Fund to promote a smooth functioning of the international monetary system and to serve as a forum for discussions in the international financial community. There are of course, and have always been, differences of view on how these basic elements can be best pursued, and some of these problems will be discussed in what follows.