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Another Look at the Underlying Cause of the End of the Bretton Woods System: International Price Differences Perspective
Author(s) -
Fukumoto Yukio
Publication year - 2011
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2011.00990.x
Subject(s) - purchasing power parity , economics , inflation (cosmology) , monetary economics , price level , purchasing power , relative price , international economics , macroeconomics , exchange rate , physics , theoretical physics
In this study, the sustainability of the Bretton Woods system from the standpoint of purchasing power parity is discussed. The paper uses wholesale price indexes of the group of seven industrialized countries (G‐7) and examines when persistent price disparities among the countries occurred by applying the panel unit root tests. It is found that the price indexes of G‐7 countries began to diverge in the first half of the 1960s. Evidence from international price differences suggests that the price indexes may have signaled the breakdown of the Bretton Woods system before the inflation rate in the USA accelerated.