Critical Thinking Assignment
Exchange Rate Determination
Saudi Arabian Riyal and the U.S. Dollar
Q- 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. For this week’s discussion, please answer the following questions:
- What are the advantages and disadvantages of the pegged exchange rate?
- Analyze the effect on the economy of Saudi Arabia (GDP, interest rates, inflation, and trade balance) given two scenarios when there is a dramatically declining world oil price or a dramatically increasing world oil price.
Directions:
- Your essay is required to be five pages in length, which does not include the title page and reference pages, which are never a part of the content minimum requirements.
- Support your submission with course material concepts, principles, and theories from the textbook and at least three scholarly, peer-reviewed journal articles. Use the Saudi Digital Library to find your resources.
- Use academic writing standards and follow APA style guidelines.
- Review the grading rubric to see how you will be graded for this assignment.
Learning Outcomes
- Describe the structure and workings of the global foreign exchange market.
- Analyze how exchange rates are determined by the currency supply and demand.
- Analyze the determinants of exchange rates in the short, medium, and long term.
Readings
Required:
Chapter 12 in International Economics
Ofer, A., & Varon, E. (2019). Turkish currency crisis- spillover effects on European banks. Borsa Istanbul Review, 19(4), 372-378.
Recommended:
Chapter 12 PowerPoint slides Chapter 12 PowerPoint slides - Alternative Formats
Hiro, I., & McCauley, R. (2019). A key currency view of global imbalances. Journal of International Money and Finance, 94, 97-115. https://doi-org.sdl.idm.oclc.org/10.1016/j.jimonfin.2019.01.013
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.