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