BRETTON WOODS AGREEMENT

In July of 1944, representatives from 44 nations met at Bretton Woods, New Hampshire, for an international monetary conference. There, they developed the groundwork to establish of two international organizations, the International Money Fund (IMF), and the International Bank for Reconstruction and Development, in assist in the creation of a stable economic foundation in the post–World War II (1939–1945) world. The measures detailed at Bretton Woods were adopted by the United States and other participating nations in 1945, officially creating the IMF and the International Bank.

The function of the IMF is to maintain orderly currency practices in international trade. The function of the International Bank is to facilitate the extension of long-term investments for specified purposes, such as development and structural improvements in a nation. Amendments were made to the initial agreement in 1969 and in 1978, enhancing the role of the IMF and establishing "Special Drawing Rights" (SDRs) that are used by the IMF as legal guidelines for all of its currency transfers. The IMF monitors compliance and assists nations in defending their officially established exchange rates. If a country's foreign exchange problems prove to be more than temporary, the IMF advises the country to devalue its currency and to undertake domestic actions designed to stem further declines in the value of its currency.