Chapter 10 International liquidity
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The international means of payment, store of value and unit of account in the nineteenth century was gold. The Bretton Woods conference in 1944 assigned a unique role to the US dollar (later augmented by SRDs). It also decreed fixed exchange rates. The World Bank and the International Monetary Fund were created to police the rules and inject liquidity. Because devaluation was not an option, the burden was put on capital controls and (deflationary) macroeconomic policy to ensure a balance in the current account. Mundell draw attention to the unholy trilemma when central banks tried to do too much. In 1973 the end of Bretton Woods means that parities became free to float.

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