Journal of Applied Finance & Banking

Exorbitant Global Imbalances

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• Abstract

  The Bretton Woods system in the aftermath of the Second World War provided the world economies with a monetary framework to replace the Gold Standard that prevailed in the preceding period. The system to rebuild war-torn economies worked fine but it could not meed the needs of the growing world trade and economy. Post Bretton Woods world evolved into a global reserve system adopting the currency of the dominant power at this time, the United States, the dollar. In the second half of the 20th century the status of the dollar as the international reserve currency was unchallenged and the United States benefited from this privileged position, for which, although, it had to pay a small price for that as well. In this paper we look at the consequences – mostly economic – this global reserve system in terms of its stability, adjustment mechanism, and its equity.