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The Bretton Woods System definitions

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  • Bretton Woods System
    A post-WWII arrangement linking currencies to the US dollar, which was convertible to gold, aiming for global exchange rate stability.
  • Fixed Exchange Rate
    A currency value maintained at a set level against another currency, preventing market-driven fluctuations.
  • US Dollar
    The central currency in the system, pegged to gold and used as the anchor for other currencies' values.
  • Gold Reserves
    Stores of precious metal held by central banks, backing the value of the US dollar during the system's operation.
  • Central Bank
    National financial authority responsible for holding reserves and managing currency exchange under the system.
  • International Monetary Fund
    An institution created to lend reserves to countries facing shortages, helping maintain exchange rate stability.
  • Dollar Reserves
    Foreign holdings of US currency, used as a substitute for gold to support national currencies.
  • Undervalued Currency
    A national currency set below its market equilibrium, often to boost exports and create trade imbalances.
  • Surplus
    An excess supply of a currency resulting from fixed rates, often leading to imbalances in international trade.
  • Shortage
    A deficit in currency supply caused by fixed rates, disrupting equilibrium and prompting intervention.
  • Equilibrium
    A state where supply and demand for a currency are balanced, typically absent in fixed rate systems.
  • Managed Float System
    A post-1973 arrangement where exchange rates are mostly market-driven, with occasional government intervention.
  • Revaluation
    An upward adjustment of a currency's fixed value, often resisted to protect export competitiveness.
  • Inflation
    A general rise in prices, often triggered by governments printing money to address currency shortages.
  • Export
    Goods or services sold abroad, whose prices are affected by currency valuation under fixed exchange systems.