Breton Woods

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Breton Woods Agreement is one of the historic events that led to development of major organizations in the world economy. The agreement ensured the rise of major financial institutions including the IMF, World Bank and GATT (Michael D. Bordo and Barry Eichengreen, 1993). The agreement however, came in to solve postwar goals. Countries resorted to exchange controls, tariff warfare and competitive depreciation so that they could emerge from depression at the expense of neighboring countries.

Memorable works of great economists ensured the creation of international stabilization fund and also a bank to facilitate development and reconstruction after the World War II. A contributory fund came into existence. IMF roles included currency stability, facilitation of international settlements and, finally to encourage capital flows to the economy. 

Breton Woods Agreement also plays more roles in financial assistance. IMF and World Bank provide adequate incentives to maintain required cooperation for member countries all over the world. However, GATT did not provide financial support but rather it dealt with conflicts that arose from member countries. This body was concerned with policies needed for smooth functions across the borders.

The Breton Woods system is characterized by fixed exchange rates even though market forces have affected them lately. Its goals are still valid in the present day economic system. The world enjoys several benefits of the Breton Woods Agreement a system which has attempted to unite the world in all respects. One of the major benefits is expansion of international trade. This expansion ensured great investments and development of notable macroeconomic events for almost all industrialized countries.

In addition, the system also ensured stability of exchange rates in the world economy for many industrialized nations. The agreement created economic policies that controlled budget deficits and inflation as well. Countries had a benchmark for inflation and budget deficits that guide them in adjusting their exchange rates.    

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