25 Cents – The Bahamas

In 2007, The Bahamas operated under a long-standing and stable currency regime, with the Bahamian dollar (BSD) pegged at a 1:1 parity to the United States dollar (USD). This fixed exchange rate, established in 1973, was a cornerstone of the nation's financial policy, managed by The Central Bank of The Bahamas. The peg provided critical stability for the tourism- and import-dependent economy, minimizing exchange rate risk for foreign investors and simplifying transactions for the millions of American visitors, who could use USD interchangeably with BSD throughout the islands.

The economy in 2007 was experiencing moderate growth, primarily fueled by a robust tourism sector and significant foreign direct investment in large-scale resort and real estate projects, particularly in Nassau and on Paradise Island. This economic activity generated sufficient foreign reserves, which were essential for maintaining the currency peg. The Central Bank's primary monetary policy tools were focused on supporting this peg and managing liquidity, rather than setting independent interest rates. Inflation, while a concern, was largely imported due to the country's heavy reliance on foreign goods and energy.

However, underlying challenges were present. The fixed parity, while stable, limited monetary policy flexibility and required consistent foreign exchange earnings. The economy's heavy dependence on the US made it vulnerable to any downturn in its northern neighbor. Furthermore, the global financial crisis, which began to unfold in late 2007, loomed as a significant threat. While the direct impact on the currency peg was not immediate in that year, the impending recession in the US posed a serious risk to the tourism and investment flows that were the lifeblood of The Bahamas' foreign reserves and, by extension, the stability of its dollar.