The International Monetary System
This section gives a detailed perspective into the evolution of monetary standards and how the value of money is determined. You will learn how the value of money was determined by gold and how the value of money became independent of gold. The Bretton Woods agreement led to the establishment of the IMF and the World Bank. What effects did the Bretton Woods agreement have on currencies?
Post–World War II
National Flexibility
To enable countries to manage temporary but serious downturns, the Bretton Woods Agreement provided for a devaluation of a currency – more than 10 percent if needed. Countries could not use this tool to competitively manipulate imports and exports. Rather,
the tool was intended to prevent the large-scale economic downturn that took place in the 1930s.