. The Central Bank of the Bahamas pegs the Bahamian Dollar to the United States Dollar at a price of 1 BSD per USD. As an analyst for XYZ Consulting Inc., you have been asked to predict the behavior of key macroeconomic variables in the Bahamas for different policy scenarios. Using all the appropriate diagrams, your analysis must describe the Bahamian money and output markets, as well as the foreign exchange market. To perform this task, you must assume that prices are sticky: fixed in the short-run and flexible in the long-run. The scenarios are: a) A temporary restrictive monetary policy in the Bahamas. b) A temporary restrictive fiscal policy in the Bahamas.

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.