1971 – 2021 50 Years of Flexible Exchange Rates: reasons, lessons and perspectives
This year marks the 50th anniversary of the end of the Bretton Woods system and the move to flexible exchange rates. Such a juncture invites us to reflect on the consequences – the long-term dynamics and processes still shaping our world – and confronts us with the challenges ahead for the global monetary and financial system.
Three Geneva based institutions (Graduate Institute, Observatoire de la Finance & the International Center for Monetary and Banking Studies) are jointly organizing a series of panel discussions on Zoom in March 2022, with sessions each Tuesday at 6pm CET. Four are planned (March 1, 8, 15, and 22) with details provided below.
An abrupt move to a new era
In August 1971, President Nixon announced the suspension of the gold convertibility of the dollar after a three-day confidential meeting at Camp David with his closest aides. The decision was motivated not only by internal economic concerns, but also a desire to protect the central role of the dollar in the world economy. Despite attempts to contain the damage to international monetary stability, the final collapse of the Bretton Woods system would follow two years later. Nixon’s decision opened the era of flexible exchange rates, tossing policy makers into unfamiliar new territory.
Seen from today’s perspective, the decision fundamentally changed economic and monetary arrangements worldwide. Central banks had to find new foundations for their policies. New spaces opened for private actors and financial innovation surged, subsequently leading to the creation of new markets and instruments. Modern international finance and the process of financialization are the most evident, if unanticipated, consequences of this decision.
Flexible exchange rates were supposed to expand the toolbox of policy makers and free them from outside constraints, giving them greater autonomy to focus on their countries’ needs. Did this promise materialize? The era of flexible rates did not mark the end of balance of payments disequilibria, nor financial crises. To cope, public policies have evolved and policy makers are constantly looking for better tools.
The shift also impacted the economics profession and research agendas in universities, banks, and public institutions. New problems, new theories, and even new disciplines – such as international finance – have emerged to align with new realities.
Fifty years later, the world is still looking to deliver economic, financial, and political stability. What lessons and what perspectives can we draw for shaping a better and more sustainable future? Is it possible to envisage a set of policies and institutions consistent with a more resilient and harmonious international monetary and financial system?
No fewer than 20 world-class experts will share their thoughts, recollections, and concerns with us in four panels:
Paul Dembinski (Observatoire de la Finance & University of Fribourg),
Ugo Panizza (Geneve Graduate Institute & ICMB),
Alexandre Swoboda (Geneva Graduate Institute),
Cédric Tille (Geneva Graduate Institute).
Session 1, March 1 2022 (6 PM, CET): What happened, when, and why? How did decision makers perceive the situation?
Introductory remarks, Ugo Panizza, Geneva Graduate Institute & ICMB
Moderator: Rui Esteves, Geneva Graduate Institute
Jacques de Larosière, former Managing Director of IMF
Barry Eichengreen, University of California Berkeley
Catherine Schenk, Oxford University
Harold James, Princeton University
Session 2, March 8 2022 (6 PM, CET): What problems did the move to floating rates solve? What have we learnt on the pros and cons of policy regimes?
Moderator: Paul Dembinski, Observatoire de la Finance
Paulina Restrepo, Federal Reserve Bank of Saint Louis
Ashoka Mody, Princeton University
Ladislau Dowbor, Pontifical University of Sao Paulo
Charles Pictet, Pictet&Cie
Session 3, March 15 2022 (6 PM, CET): How has the end of Bretton Woods influenced economic research?
Moderator: Nathan Sussman, Geneva Graduate Institute
Maury Obstfeld, University of California Berkeley
Atish Ghosh, International Monetary Fund
Beatrice Cherrier, Ecole Polytechnique
Giancarlo Corsetti, European University Institute
Session 4, March 22 2022 (6 PM, CET): The inescapable dollar? In search of building blocks for monetary and financial governance.
Welcome remarks by Cédric Tille, Geneva Graduate Institute
Moderator: Beatrice Weder di Mauro, Geneva Graduate Institute
Claudio Borio, Bank for International Settlements
Pierre-Olivier Gourinchas, International Monetary Fund
Philip Lane, European Central Bank
Richard Kozul-Wright, UNCTAD
Concluding remarks by Alexander Swoboda, Geneva Graduate Institute.
Ugo Panizza is Professor of Economics and Pictet Chair in Finance and Development at the Graduate Institute of International and Development Studies. He is also the Director of the International Center for Monetary and Banking Studies (ICMB), Editor in Chief of International Development Policy, and deputy director of the Center for Finance and Development. He is a Vice President and Fellow of CEPR, and Fellow of the Fondazione Einaudi. Before joining the Graduate Institute, he was Chief of the Debt and Finance Analysis Unit at the United Nations Conference on Trade and Development (UNCTAD) and a Senior Economist at the Inter-American Development Bank. He also worked at the World Bank and taught at the American University of Beirut and the University of Torino.
Rui Esteves is Professor in the International Economics and International History departments of the Geneva Graduate Institute. He specializes in monetary and financial history, straddling the fields of international finance, institutional economics and public finance. His research provides perspective on the globalization of finance, financial crises, sovereign debt, financial market architecture, the choice of exchange rate regimes and emigrant remittances, as well as rent-seeking and corruption in public office.
Jacques de Larosière
Former Undersecretary of Monetary Affairs: French Treasury (1974-1978). Former Managing Director of the IMF (1978-1987). Former Governor of the Banque de France (1987-1993). Former President of the European Bank for Reconstruction and Development (1993-1998). Chairman of the high level committee on the reform of the European financial supervisory architecture (2008-2009). Advisor to the Chairman of BNP Paribas (1998-2009). Chairman of Eurofi (2000- ). Member of the G30. Chairman of the “Observatoire de l’Epargne Européenne (1999 - ). Chairman of the Strategic Committee of the Agence France-Trésor (2004 - ).
Barry Eichengreen is George C. Pardee and Helen N. Pardee Chair and Distinquished Professor of Economics and Professor of Political Science at the University of California, Berkeley, where he has taught since 1987. He is a Research Associate of the National Bureau of Economic Research (Cambridge, Massachusetts) and Research Fellow of the Centre for Economic Policy Research (London, England). In 1997-98 he was Senior Policy Advisor at the International Monetary Fund. He is a fellow of the American Academy of Arts and Sciences (class of 1997)
Catherine Schenk is Professor of Economic and Social History at the University of Oxford. She has previously held posts at the University of Glasgow, Royal Holloway University of London and Victoria University Wellington NZ. She has written several books and many articles on international monetary relations since 1945 and has been a visiting researcher at the Hong Kong Institute for Monetary Research, the International Monetary Fund and the Bank for International Settlements. Her current research investigates the evolution of the global payments system https://glocobank.web.ox.ac.uk/
Harold James is Claude and Lore Kelly Professor in European Studies at Princeton University and official historian of the IMF. His books include The German Slump (1986); International Monetary Cooperation Since Bretton Woods (1995); The End of Globalization (2001); and The War of Words: A Glossary of Globalization (2021).
Prof. Paul H. Dembinski is the initiator and Director of the Foundation of the Observatoire de la Finance in 1996. The mission of the Observatoire de la Finance is to promote awareness of ethical concerns in financial activities and the financial sector. Paul H. Dembinski is the founder and editor of the quarterly bilingual journal entitled Finance & the Common Good/Bien Commun. In parallel, he is partner and co-founder (with Alain Schoenenberger) of Eco’Diagnostic, an independent economic research institute working for both government and private clients in Switzerland and elsewhere. Paul H. Dembinski is also Professor at University of Fribourg (Switzerland) where he holds the chair of “International Competition and Strategy”. In 2019, he has been awarded a Doctorate honoris causa by the SGH-Warsaw School of Economics. Latest published book: Ethics and Responsibility in Finance, Paul H. Dembinski , Routledge, 2017.
Paulina Restrepo-Echavarria is a senior economist at the Federal Reserve Bank of St Louis, an adjunct professor at Washington University in St Louis, an Associate Editor for the Review of Economic Dynamics, and a member of the potential GDP Committee of the Finance Ministry of Colombia. She specializes in the areas of International Macro---with an emphasis in capital flows and sovereign default---and Search Theory—with an emphasis in labor and dating/marriage markets.
Ashoka Mody is Charles and Marie Robertson Visiting Professor at the School of Public and International Affairs at Princeton University. He will make the case that flexible exchange rates serve a valuable economic purpose in both developed and developing nations, and they insulate monetary policy from politics.
Ladislau Dowbor, economist, professor at the Catholic University of São Paulo, consultant to a number of international agencies. His books and technical studies can be found free of charge (Creative Commons) at http://dowbor.org.
Charles Pictet, a Swiss citizen, acted as a financial regulator in Switzerland from 2005 until 2012 in his capacity as a member of the board of FINMA. Prior to this, he worked at Pictet & Cie, a Geneva-based Swiss private bank, where he spent 25 years as a partner and senior partner. He was President of the Geneva Private Bankers Association, Vice President of the Swiss Private Bankers Association, and a member of the Board of the Swiss Bankers Association. He also served as Vice President of Economie Suisse. He is currently Vice President of the International Red Cross and Red Crescent Museum in Geneva (Conseil de Fondation), and a member of the Board of Europa Nostra. He holds an MBA from the University of St Gallen.
Nathan Sussman joined the Institute in September as Full Professor of International Economics and Director of the Institute's Centre for Finance and Development. He was Associate Professor of Economics in the Department of Economics and in the integrated Philosophy, Economics, and Political Science Programme (PEP) at the Hebrew University of Jerusalem. He was the Director of the Research Department at the Bank of Israel and a voting member of the Monetary Policy Committee. His fields of expertise are monetary and financial economic history. He has written numerous articles and co-authored a book on emerging markets and financial globalisation.
Maurice Obstfeld is the Class of 1958 Professor of Economics at the University of California, Berkeley, and a senior nonresident fellow at the Peterson Institute for International Economics. From 2015 through 2018, he served as Economic Counsellor and Director of Research at the International Monetary Fund. During 2014 and 2015, he was a Member of President Obama’s Council of Economic Advisers. He co-authored International Economics (with Paul Krugman and Marc Melitz), Foundations of International Macroeconomics (with Kenneth Rogoff), and Global Capital Markets (with Alan M. Taylor). Prior to joining the economics department at Berkeley, he held faculty appointments at Columbia and the University of Pennsylvania, as well as a visiting appointment at Harvard. He is a research associate of the National Bureau of Economic Research and a distinguished fellow of the Centre for Economic Policy Research.
Atish Ghosh is the IMF Historian. Previously, he worked in the Research and Policy Development and Review Departments of the IMF and was involved in the Ukraine and Turkish stabilization programs in the 1990s. He is the author of several books and numerous articles as well as one novel on the international monetary system and international finance.
Beatrice Cherrier is a historian of economics at CNRS, CREST and Ecole Polytechnique. She researches the applied turn in economics from the 1970s onward, including the history of macroeconomics, taxation, the relationships between economists and engineers and the role of women empirical economists in these developments.
Ph.D. from Yale (1992), his contributions range from theoretical and empirical work on fiscal and monetary policy, to analyses of currency and financial crises and their international contagion. Serves as co-editor of the Journal of International Economics, Programme Director at Centre for Economic Policy Research in London, and scientific consultant to the Bank of England and the European Central Bank.
Marie-Laure Salles became Director of the Graduate Institute of International and Development Studies in September 2020. Marie-Laure Salles is Professeure des Universités in France and before joining the Institute, she was Dean of the School of Management and Innovation at Sciences Po Paris, a school she launched in 2016, and Professor in Sociology at Sciences Po Paris. Before 2016, she had been Professor at ESSEC Business School, where she was also, in turn, Dean of the Faculty and Associate Dean for the PhD Programme.
Beatrice Weder di Mauro
Beatrice Weder di Mauro is Professor of International Economics at the Graduate Institute of Geneva, INSEAD Research Professor and Distinguished Fellow of the INSEAD Emerging Markets Institute, Singapore. Since July 2018, she is serving as President of the Centre for Economic Policy Research (CEPR). From 2001 to 2018, she held the Chair of International Macroeconomics at the University of Mainz, Germany, and from 2004 to 2012 she served on the German Council of Economic Experts. Previously, she was Assistant Professor at the University of Basel and Economist at the International Monetary Fund. She held visiting positions at Harvard University, the National Bureau of Economic Research, and the United Nations University in Tokyo.
Claudio Borio was appointed Head of the Monetary and Economic Department on 18 November 2013. At the BIS since 1987, Mr Borio has held various positions in the Monetary and Economic Department (MED), including Deputy Head of MED and Director of Research and Statistics as well as Head of Secretariat for the Committee on the Global Financial System and the Gold and Foreign Exchange Committee (now the Markets Committee). From 1985 to 1987, he was an economist at the OECD, working in the country studies branch of the Economics and Statistics Department. Prior to that, he was Lecturer and Research Fellow at Brasenose College, Oxford University. He holds a DPhil and an MPhil in Economics and a BA in Politics, Philosophy and Economics from the same university. Claudio is author of numerous publications in the fields of monetary policy, banking, finance and issues related to financial stability.
Pierre-Olivier Gourinchas is the Economic Counsellor and the Director of Research of the IMF. He is on leave from the University of California at Berkeley where he is the S.K. and Angela Chan Professor of Global Management in the Department of Economics and at the Haas School of Business. Professor Gourinchas was the editor-in-chief of the IMF Economic Review from its creation in 2009 to 2016, the managing editor of the Journal of International Economics between 2017 and 2019, and a co-editor of the American Economic Review between 2019 and 2022. He is on-leave from the National Bureau of Economic Research where he was director of the International Finance and Macroeconomics program, a Research Fellow with the Center for Economic Policy Research CEPR (London) and a Fellow of the Econometric Society.
Philip R. Lane
Philip R. Lane joined the European Central Bank as a Member of the Executive Board in 2019. He is responsible for the Directorate General Economics and the Directorate General Monetary Policy. Before joining the ECB, he was the Governor of the Central Bank of Ireland. He has also chaired the Advisory Scientific Committee and Advisory Technical Committee of the European Systemic Risk Board and was Whately Professor of Political Economy at Trinity College Dublin. He is also a research fellow at the Centre for Economic Policy Research. A graduate of Trinity College Dublin, he was awarded a PhD in Economics from Harvard University in 1995 and was Assistant Professor of Economics and International Affairs at Columbia University from 1995 to 1997, before returning to Dublin. In 2001 he was the inaugural recipient of the Bernácer Prize for outstanding contributions to European monetary economics.
Mr. Richard Kozul-Wright is Director of the Globalisation and Development Strategies Division in UNCTAD. He has worked at the United Nations in both New York and Geneva. He holds a Ph.D in economics from the University of Cambridge UK. He has published widely on economic issues including, inter alia, in the Economic Journal, the Cambridge Journal of Economics, The Journal of Development Studies, and the Oxford Review of Economic Policy. He is a co-editor of the Oxford Handbook on Industrial Policy (Oxford University Press) and The Case For a New Bretton Woods (with Kevin Gallagher) was published recently by Polity Press. Mr. Kozul-Wright is a frequent contributor to newspapers worldwide on economic issues: including the Financial Times, The Guardian, Le Monde, El País, Project Syndicate, among others. Mr. Kozul-Wright is a member of the Working Group on the Rights of Future Generations, an initiative based in Dubai, United Arab Emirates.
Alexander Swoboda is Professor of International Economics Emeritus and former Director of the Graduate Institute of International and Development Studies, Geneva. The Founding Director of the International Center for Monetary and Banking Studies, his academic appointments have included the University of Geneva, the University of Chicago’s Graduate School of Business, the London School of Economics, the SAIS Bologna Center, the University of Lausanne, and Harvard University. The recipient of various research grants, awards and fellowships, he was Senior Policy Advisor in the Research Department of the IMF (1998-2000) and a member of the Council of the Swiss National Bank (1997-2009). A member of the Euro50 Group, he has served, or serves, as a board member, consultant or adviser to a number of companies, non-profit foundations, private, governmental and international institutions (including the IMF, the World Bank and the Swiss National Bank).