VoxEU Column
by Kevin O’Rourke & Roger Vicquery
“The collapse of the Bretton Woods system has traditionally been cited as heralding a major shift towards floating exchange rates. The extent of this transition has recently been challenged. This column introduces a new index of global exchange rate fixity which is invariant to country boundaries and accounts for indirect relationships. It finds that global anchoring to the US dollar fell sharply after 1971, and global exchange rate fixity is now only about one-third of the Bretton Woods level. This potentially sheds new light on other important secular trends, including the dominant currency paradigm and the global financial cycle.”