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Why Saudi Arabian Monetary Authority is adopting the fixed exchange rate regime? That is the Saudi...

Why Saudi Arabian Monetary Authority is adopting the fixed exchange rate regime? That is the Saudi Riyal is pecked with the USD at a fixed exchange rate ?

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Saudi Arabia follows a fixed exchange rate system where its currency is fixed vis a vis US dollar. There are many benefits of Fixed exchange rate system and one of the most important reason is it reduces the volatility in earnings from the oil. The major economic activity in the Saudi Arabia is the production of crude oil and its export across the world and the economy is heavily dependent on the income from its oil and following a fixed exchange rate regime can actually help in stabilizing the income level of oil companies. Another reason is that Saudi Arabia monetary authority also wanted to reduces the speculative activity from domestic as well as international side. Having a stable currency can also helps traders and investors in reassuring that currency exchange risk has been reduce from their portfolio and it can also help in attracting large investors in the country.

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