Bretton Woods Agreement

The Bretton Woods Agreement was a landmark international monetary framework established in July 1944 at the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire, USA — attended by 44 allied nations at the end of World War II. The agreement created the post-war international monetary order based on a fixed exchange rate system anchored to the US dollar, which was itself convertible to gold at the fixed rate of USD 35 per troy ounce. Under Bretton Woods, member countries pegged their currencies to the US dollar within a ±1% fluctuation band — with the IMF (International Monetary Fund) and World Bank created as institutional pillars of the new order to provide balance of payments support and development financing respectively. India signed the Bretton Woods Agreement and became a founding member of the IMF and World Bank. The Bretton Woods system collapsed in August 1971 when US President Nixon suspended the dollar's gold convertibility — the 'Nixon Shock' — as persistent US trade deficits made the gold peg unsustainable. The end of Bretton Woods ushered in the current era of floating exchange rates. The Bretton Woods institutions — IMF and World Bank — continue to play significant roles in global financial governance, with India being both a recipient of World Bank development financing and a significant shareholder with growing voting power at both institutions.