Working Paper: NBER ID: w23037
Authors: Douglas A. Irwin
Abstract: The collapse of the gold standard in the 1930s sparked a debate about the merits of fixed versus floating exchange rates. Yet the debate quickly vanished: there was almost no discussion about the exchange rate regime at the Bretton Woods conference in 1944 because John Maynard Keynes and Harry Dexter White agreed that exchange rate stability through fixed but adjustable pegs was the right approach. In light of the difficult macroeconomic tradeoffs experienced under the gold standard a decade earlier, the outright rejection of floating exchange rates seems surprising. This paper explores the views of leading economists about the exchange rate provisions in the Bretton Woods agreement and examines why arguments for floating exchange rates were so quickly dismissed.
Keywords: No keywords provided
JEL Codes: B22; F31; F33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| historical experience of the gold standard (N13) | preference for fixed but adjustable exchange rates (F33) |
| economic turmoil of the 1930s (N14) | consensus view that flexible exchange rates are synonymous with monetary instability and trade protectionism (F31) |
| Ragnar Nurkse's report (O57) | consensus view that flexible exchange rates are synonymous with monetary instability and trade protectionism (F31) |
| Keynes and White's plans for Bretton Woods (F33) | preference for fixed exchange rates (F33) |