Meeting in Bretton Woods, New Hampshire in July 1944 representatives of 44 countries drafted and signed the Articles of Agreement of the International Monetary Fund (IMF). Taking lessons from the economic meltdown of the interwar period, the Allied countries wanted to develop an international monetary system that would facilitate full employment and price stability simultaneously allowing each country to attain external balance without restricting international trade. Bretton Woods proposed fixed exchange rates against the U.S. dollar and a constant dollar price of gold - $35 an ounce. The Member countries’ official international reserves were largely held in the form of gold or dollar assets through U.S.A.’s balance of payments deficits.
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These results were quite inconsistent under the initial Bretton Woods system. Giovannini’s this procedure of running this test faced few problems; we will be dealing with notably two. Starting off with, the sample he worked with, ignored the most flourishing period of the Bretton Woods system i.e. 'heyday'. It started in 1962, mistakenly assumed to be in 1959, when most of the currency of Europe turned convertible, extended even after 1968, the year in which there was a fall down of the gold-pool agreement and the centre country removed obligation on Federal Reserve remarks. Secondly, Giovennini’s data collected from the International Financial Statistics (IFS) for international funds; don't include gold which is a big drawback to his test. The test done excluding gold could be applied the post Bretton Woods phase, but it can't be apply during the Bretton-Woods system as gold played a vital role in conserving the reserves. To deal with the above problems, Bank Of Greece(2010) re-anticipated Giovannini’s regressions with the four sample countries in the above mentioned years , note that the tables are given in the appendix, with an account of gold which was previously ignored in the test to see the reserves after the decline of Bretton Woods system. Japan was also included as a new …show more content…
On contrast the periphery countries was not supportive of this hypothesis. In the rising period the boundary countries did support this hypothesis but it’s also true that the results are mostly assumptions and there could be a high probability of rejecting this hypothesis when it’s true and vice versa, as the sample test is very minor
These results were quite inconsistent under the initial Bretton Woods system. Giovannini’s this procedure of running this test faced few problems; we will be dealing with notably two. Starting off with, the sample he worked with, ignored the most flourishing period of the Bretton Woods system i.e. 'heyday'. It started in 1962, mistakenly assumed to be in 1959, when most of the currency of Europe turned convertible, extended even after 1968, the year in which there was a fall down of the gold-pool agreement and the centre country removed obligation on Federal Reserve remarks. Secondly, Giovennini’s data collected from the International Financial Statistics (IFS) for international funds; don't include gold which is a big drawback to his test. The test done excluding gold could be applied the post Bretton Woods phase, but it can't be apply during the Bretton-Woods system as gold played a vital role in conserving the reserves. To deal with the above problems, Bank Of Greece(2010) re-anticipated Giovannini’s regressions with the four sample countries in the above mentioned years , note that the tables are given in the appendix, with an account of gold which was previously ignored in the test to see the reserves after the decline of Bretton Woods system. Japan was also included as a new …show more content…
On contrast the periphery countries was not supportive of this hypothesis. In the rising period the boundary countries did support this hypothesis but it’s also true that the results are mostly assumptions and there could be a high probability of rejecting this hypothesis when it’s true and vice versa, as the sample test is very minor