While Saudi Arabia seeks to diversify its economy, the Saudi economy is dominated by the petroleum sector. In addition, the Saudi Arabian Riyal (SAR) is pegged to the U.S. Dollar.
In a critical essay, discuss the advantages and disadvantages of the pegged exchange rate. Indicate the main considerations Saudi Arabia faces from a currency perspective (e.g., currency values, interest rates, inflation, and trade issues) that ensue given two scenarios:
- The first scenario is a dramatically declining world oil price.
- The second scenario is a dramatically increasing world oil price.
readings required:
Hiro, I., & McCauley, R. (2019). A key currency view of global imbalances. Journal of International Money and Finance, 94, 97-115.
Muhammad, A., & Iftikhar, A. (2019). Empirical investigation of foreign direct investment and current account balance in East Asian economies. Journal of Commerce & Social Sciences, 13(3), 779-795.
Chapter 12 in International Economics PowerPoint attached
Ofer, A., & Varon, E. (2019). Turkish currency crisis- spillover effects on European banks. Borsa Istanbul Review, 19(4), 372-378.
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