International Finance And Globalisation ( Mn7574 )

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Assignment in the elective module: International Finance and Globalisation (MN7574)

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Describe the three key institutional bodies established in the Bretton Woods agreement. What was their purpose, and how did they operate? Give an account of the collapse of the agreement and discuss the consequences of this collapse for international finance.

This coursework is submitted as part of the requirements for the award of the MSc in Finance
University of Leicester – School of Management
Leicester
July 2014

Table of Contents

Introduction 3
Section 2: Bretton Woods Institutions: purpose of establishment and cooperation 4
Section 3: Bretton Woods: The chronology of events 6
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Opponents of the EU argue that since the formation of the Euro area we have observed an increasing divergence between the northern and southern European countries; with the former enjoying the majority of the benefits of the common currency and the latter facing significant issues with their macroeconomics and struggling to keep up with their northern counterparts.
The formation of the EEA, however, was not the first attempt by societies to converge their interests under a common economic policy. Its predecessor, the Bretton Woods system that was formatted in 1944, endeavoured to set up a set of rules that would define the monetary relationships between a number of countries. Its primary feature was the commitment by the member nations to maintain a relatively fixed exchange rate against the dollar, which was tied to gold at a fixed rate.
Alongside with the set up of the system, the members agreed to establish two institutional bodies that would oversee the members’ activities, provide assistance when needed and maintain the cooperation between the members. Those were the International Monetary Fund (IMF) and the World Bank of Trade and Development (World Bank). Subsequently, the members aimed to establish the International Trade Organization (ITO) that was replaced by the General Agreement on Tariffs and Trade (GATT). All three
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