New Governor
The appointment of a new Governor of the Bank of Guyana would be major financial news in many parts of the world if Guyana was a major world economy. But notice of the new appointment will pass soon and the financial system in Guyana will remain unchanged since the new leadership of the central bank does not anticipate any changes in monetary policy in the foreseeable future. Yet, this very important appointment carries with it responsibilities that can impact the competitiveness of Guyanese products abroad and the profitability of many businesses at home. Among the responsibilities is that of ensuring exchange rate stability as it has the potential of causing the money supply to expand or decline, and as a consequence, impact the rate of inflation in the country. Interest in the behaviour of the exchange rate is just as important as interest in the rate associated with the cost of borrowing money and in making the Guyana economy strong. For this reason, this article examines the exchange rate arrangement of Guyana and the challenges that will confront the new governor and his team from that policy.
Problematic
Exchange rate policy is regarded as the most problematic international monetary issue in the world and Guyana had to confront that problem from the time it became an independent nation. Exchange rate policy involves determining the domestic price of a foreign currency. In other words, it regards the currencies of other countries as commodities and seeks to establish a purchase price for those currencies. It then turns around like any merchant and determines the price at which it will sell the currency, thereby establishing a margin of profit for itself. The relevance of an exchange rate is in its ability to permit residents of different countries to buy from, and sell to, each other with minimal difficulty. Many items of goods enter cross-border trade. The continual advancement of technology has also enabled capital markets to develop and many financial instruments have become part of the cross-border transactions between countries. The existence of exchange rate policies also enables producers to shift resources from one country to another and carry on production through subsidiaries and joint ventures. It also enables the production of standardized products such as those sold by fast-food chains to move overseas without the owners of the products themselves having to move and own the production facilities offshore. The economic exchanges that take place under those various types of transactions are
