In this paper we argue that net capital inflows to the United States did not cause the financial crisis that now engulfs the world economy. A crisis caused by such flows has been widely predicted but that crisis has not occurred. Indeed, the international monetary system still operates in the way described by the Bretton Woods II framework and is likely to continue to do so. Failure to properly identify the causes of the current crisis risks a rise in protectionism that could intensify and prolong the decline in economic activity around the world.
*Published:
Michael Dooley & David Folkerts-Landau & Peter Garber, 2009.
"Bretton Woods Ii Still Defines The International Monetary System,"
Pacific Economic Review,
Blackwell Publishing, vol. 14(3), pages 297-311, 08.
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This paper was revised on February 18, 2009
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