By the early 1960s, the U.S. dollar’s fixed value against gold, under the Bretton Woods system of fixed exchange rates, was seen as overvalued: International Political Economy Case Study, NTU

By the early 1960s, the U.S. dollar’s fixed value against gold, under the Bretton Woods system of fixed exchange rates, was seen as overvalued. IMF members have been free to choose any type of exchange arrangement they wish since the collapse of the Bretton Woods system between 1968 and 1973.

Many feared that the collapse of the Bretton Woods system would signal the end of the rapid growth. In reality, the switch to floating exchange rates came at a good time because economies found it easier to adapt to more expensive oil when the price started to rise quickly in October 1973.

Since then, floating rates have made it easier to respond to shocks. Beginning in the middle of the 1970s, the IMF attempted to address the balance of payments issues that many of the world’s poorest nations were experiencing by offering concessional credit through what was known as the Trust Fund.

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