The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries

Michael Dooley, David Folkerts-Landau and Peter Garber

No 10332, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we explore some implications of the revived' Bretton Woods system for exchange market intervention and reserve management in periphery countries. Financial policies in these countries are seen as a component of a more general portfolio management policy in which the formation of an efficient domestic capital stock is a key objective. Because intervention in financial markets is an important part of their development strategy, intervention in exchange and financial markets has, and we argue will continue to be, large and persistent enough to generate predictable deviations of exchange rates and relative yields in industrial country financial markets from normal cyclical patterns. We argue that management of the currency composition of international reserves by emerging market governments and central banks is unlikely to alter these conclusions.

JEL-codes: F02 F32 (search for similar items in EconPapers)
Date: 2004-03
New Economics Papers: this item is included in nep-his, nep-ifn and nep-mac
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Published as Dooley, Michael P., David Folkerts-Landau, and Peter Garber. "The Revived Bretton Woods System." International Journal of Finance and Economics (John Wiley & Sons Ltd.) 9(4): 307-313, October 2004

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