Managing exchange rates

Critical Thinking: Saudi Arabia’s Currency and the U.S. Dollar

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.

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In a critical essay, 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.

Analyze the results you expect from each scenario.

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 academic writing standards and follow APA style guidelines.

· Sources/ reference should not be older than 5 years.

How to write your paper?

· Explain different approaches to managing exchange rates (market-based or fixed)

· Current exchange rate system: explain the current exchange regime, including the fact that the exchange rate is pegged (fixed) to that of U.S. dollar

· Falling oil prices scenario: currency value, interest rates, inflation and trade

· Rising oil prices scenario: currency value, interest rates, inflation and trade.

· conclusion

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