Definition of 'Bretton Woods Agreement'
Major outcomes of the Bretton Woods conference included the formation of the International Monetary and the International Bank for Reconstruction and Development and, most importantly, the proposed introduction of an adjustable pegged foreign exchange rate system. Currencies were pegged to gold and the IMF was given the authority to intervene when an imbalance of payments arose.
Investopedia explains 'Bretton Woods Agreement'One of the proposals of the Bretton Woods conference was that currencies should be convertible for and other current account transactions.
Following the end of World War II in 1945, Europe and the rest of the world embarked on a lengthy period of reconstruction and economic development to recover from the devastation inflicted by the war. Although gold initially served as the base reserve currency, the U.S dollar gained momentum as an international reserve currency that was linked to the price of gold.