(6) Currency Summary and Analysis

According the CIA world Factbook, in 2008 $203.86 Guyanese dollars was equal to $1 US. The inflation rate of Guyana which is 8.3% ranks 131^st of 222 countries listed (CIA World Factbook). Their money is fiat money given out in bank notes and coins. It is a good medium of exchange, but not a very good store of value (an item that people can use to transfer purchasing power from the present to the future) or unit of account(a measure people use to post prices and record debts) (Principles of Economics). With constantly changing inflation rates on the country’s money, it would be hard to know the true value of the Guyanese dollar. If the inflation raises dramatically those holding Guyanese money would be “taxed” due to the decrease of value of the money they hold. If loans are taken out without taking adjustments for inflation into account, banks could lose money, due to the decrease in true value of the money being paid back. The central Bank of Guyana is in some aspects like that of the United States. It is a last resort lender to local banks. It also controls money supply through the print of bank notes and production of coins. It is closely tied to the government and often supplies the funds that the government may need. The inflation rate has constantly risen from 4.7% to 12.3% from 2002-2007; however, it dropped back down to 8.3% in 2008(Nationmaster/CIA World Factbook). This dip does not fit general trend in the inflation of the country’s currency and cannot yet be taken as a sign of a new general decrease in inflation. Until the constant fluctuation of Guyana’s inflation can be stabilized, its currency should not be considered a good store of value or unit of account.

Works Cited

1. "South America - Guyana." C.I.A. World Factbook. Ed. C.I.A. Web. Nov. 2009.

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2. Mankiw, Gregory N. Principles of Economics. 5th ed. South-Western CENGAGE Learning, 2008. Print.

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