The
Bretton Woods system of
monetary management established the rules for commercial and financial relations among the
United States,
Canada,
Western Europe,
Australia and
Japan in the mid-20th century. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states. The chief features of the Bretton Woods system were an obligation for each country to adopt a
monetary policy that maintained the
exchange rate (± 1 per cent) by tying its currency to gold and the ability of the
IMF to bridge temporary
imbalances of payments. Also, there was a need to address the lack of cooperation among other countries and to prevent
competitive devaluation of the currencies as well.