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BRETTON-WOODS SYSTEMS, OLD AND NEW, AND THE ROTATION OF EXCHANGE-RATE REGIMES

 

 

Stephen G. Hall

Leicester University

 

George Hondroyiannis

Bank of Greece and Harokopio University

 

P.A.V.B. Swamy

Federal Reserve Board (retired)

 

George Tavlas

Bank of Greece

 

 

 

Abstract

A recent contribution to the literature argues that the present international monetary system in many ways operates like the Bretton-Woods system. Asia is the new periphery of the system and pursues an export-led development strategy based on undervalued exchange rates and accumulated foreign reserves. The United States remains the centre country, pursuing a monetary-policy strategy that overlooks the exchange rate. Under both regimes the United States does not take external factors into account in conducting monetary policy while the periphery does take external factors into account. We provide results of a test of this hypothesis. Then, we present a new method for decomposition of a seasonally adjusted series the business cycle and other components using a time-varying-coefficient technique that allows us to test the relationship between the cycle and macroeconomic policies under both regimes. 

 

Keywords: Revived Bretton-Woods system, asymmetry hypothesis, time-series, decomposition, time-varying-coefficient estimation

JEL classifications: C22, E32, F33

 

 

Correspondence:

George S. Tavlas
Director General
Bank of Greece
21, E. Venizelos Ave.,
102 50 Athens, Greece

tel.  + 30 210 3202370, fax. + 30 210 3202432

Email: gtavlas@bankofgreece.gr


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