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The Bretton Woods Institutions, and peripherally Bretton Woods agreement, set up after the end of the Second World War to help rebuild the economies of allied countries, had the main goal of correcting the distortions created by the gold standard. The United States was thus the only country allowed fixed the price of its currency (the US Dollar) in terms of gold, with other currencies pegged to the dollar.  Large U.S. balance of payments deficits, significant gold outflows, the unwillingness of major trading partners to realign currency values and the unilateral termination of convertibility of the US dollar to gold by the Nixon administration led to the collapse of the Bretton Woods agreement in 1971 and by 1973, countries had embraced the floating system (Alagidede, P., & Ibrahim, M., 2016). This resulted in exchange rate volatility in all countries (Adu – Gyamfi, A., 2011). Exchange rate volatility is postulated to negatively impact countries especially developing countries (Prasad et al. 2003). Ghana introduced a flexible exchange rate (managed float) system in 1978 under which the exchange rate for the Cedi in terms of the U.S dollar was to be adjusted to reflect the underlying economic, financial and balance of payments situation. For most part of this system’s existence the Cedi experienced instability (Mumuni and Owusu – Afriyie, 2004). Thus in August 1978 when the rate of exchange was fixed at 2.75 = U.S $1.00, this system was discontinued (Tutu et al, 1991).Ghana, in 1986 adopted a two – window system (dual exchange rate markets). Window one (applicable to government transactions, petroleum imports, cocoa and other traditional export receipts) maintained a fixed but adjustable exchange rate whilst window two (applied to all other transactions) used a weekly auction system.  In 1992, the two window auction systems were unified and replaced by an interbank wholesale system and a weekly wholesale auction was used to determine the interbank rate.

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