An Essay on the Revived Bretton Woods System Michael P. Dooley, David Folkerts-Landau, and Peter Garber NBER Working Paper No 9971 mber 2003 No.F02,F32,F33 ABSTRACT The economic emergence of a fixed exchange rate periphery in Asia has reestablished the United States as the center country in the bretton Woods international monetary system We argue that the normal evolution of the international monetary system involves the emergence of a periphery for which the development strategy is export-led growth supported by undervalued exchange rates capital controls and official capital outflows in the form of accumulation of reserve asset claims on the center country. The success of this strategy in fostering economic growth allows the periphery to graduate to the center. Financial liberalization, in turn, requires floating exchange rates among the center countries. But there is a line of countries waiting to follow the Europe of the 1950s/60s and Asia today sufficient to keep the system intact for the foreseeable future Michael P. Dooley Department of Economics Social Sciences i University of California Santa Cruz, CA 95064 and NBer mpd@ucsc.edu David folkerts-Landau 1331 21st Street Nw Washington DC 20036 davidfolkerts-landau@db.com Peter Garber 7 Seaview Drive Harington, RI petergarber(@db.comAn Essay on the Revived Bretton Woods System Michael P. Dooley, David Folkerts-Landau, and Peter Garber NBER Working Paper No. 9971 September 2003 JEL No. F02, F32, F33 ABSTRACT The economic emergence of a fixed exchange rate periphery in Asia has reestablished the United States as the center country in the Bretton Woods international monetary system. We argue that the normal evolution of the international monetary system involves the emergence of a periphery for which the development strategy is export-led growth supported by undervalued exchange rates, capital controls and official capital outflows in the form of accumulation of reserve asset claims on the center country. The success of this strategy in fostering economic growth allows the periphery to graduate to the center. Financial liberalization, in turn, requires floating exchange rates among the center countries. But there is a line of countries waiting to follow the Europe of the 1950s/60s and Asia today sufficient to keep the system intact for the foreseeable future. Michael P. Dooley Department of Economics Social Sciences I University of California Santa Cruz, CA 95064 and NBER mpd@ucsc.edu David Folkerts-Landau 1331 21st Street, NW Washington, DC 20036 david.folkerts-landau@db.com Peter Garber 7 Seaview Drive Barington, RI peter.garber@db.com