TheBretton Woods systemof internationalmonetarymanagement established the rules forcommercial andfinancialrelations among the world's major industrial states. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states.

Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established theInternational Bank for Reconstruction and Development (IBRD) (now one of five institutions in theWorld Bank Group) and theInternational Monetary Fund (IMF). These organizations became operational in 1946 after a sufficient number of countries had ratified the agreement.

The chief features of the Bretton Woods system were an obligation for each country to adopt amonetary policy that maintained theexchange rate of itscurrencywithin a fixed value—plus or minus one percent—in terms ofgold; and the ability of the IMF to bridge temporary imbalances of payments. In the face of increasing strain, the system collapsed in 1971, following theUnited States' suspension of convertibility fromdollarsto gold.