The Impact of Bretton Woods System on the World Economy and the Increase in World Trade - Essay Example

For example, if Britain economy faces trade deficit, the increase in the supply of pounds relative to dollar inserts downward pressure on pound value whereas, decrease in supply of pounds relative to dollar inserts upward pressure on value of pound.... Finally, the impact of depreciation of British Pound on the UK economy has been analysed by using relevant data, graphs and tables.... Under the fixed exchange rate system, economies agreed that if the trade deficit of an economy increased then they would be able to manage supply of currency in international markets....

In order to enhance the importance of Europe in the monetary mechanism of the world, there was a need of unity among European countries.... (a) Optimum Currency Area and its relevance with Euro Area: The idea of a single currency to trade in a certain geographical area is not a new one.... With the help of this theory, a single currency is supposed to help in reducing trade obstacles among neighbouring countries.... However the theory of optimum currency area does not include political economy factors like the desire for European integration on political level, reducing the exchange rate risks and achieving stable price levels....

could be viewed as its impact on the current account.... has its impact on the capital account of the country.... The balance of current account is measured as the net exports of goods and services, net investment income and net transfers whereas the… In this paper we will summarize the effects of income, inflation rate and interest rate as suggested by Kaplan (2002) on balance of payments of the U....

While this was initially intended to… further improve international trading for all member countries of the world trade Organization (WTO), with the interference of the government as well as the entry of politically-motivated agendas in creating national policies that align with international policies, it will be ossible for hyperglobalization to be fully-embraced by countries without negative consequences.... In turn, the government has to choose between following the international policy at the cost of the economy and of the local market, or be subject to the sanctions imposed to countries when these are unable to comply with international standards....

Since the establishment of the bretton woods system in the late 1940s, the United States dollar has set established as the international currency or exchange.... In the eventuality that these talks are constructive and the combined economic power of these two extraordinarily powerful nations is able to craft a new global monetary system, the overall power that the United States might otherwise hope to affect around the world would be drastically and immediately reduced....