Work

Lebanon: From Dollars to Lollars

Year: 2025

Type: article

Abstract: ABSTRACT What were the policies that created one of the world's largest financial and economic crisis (as a percent of GDP) in Lebanon in the early 2020s? An artificially strong currency peg created a consumption boom financed by government debt and international capital flows/remittances, exposing both the public and private sector to classic currency mismatch vulnerabilities. Moreover, a volatile deposit growth through international remittances created banking risks that both a government and a central bank needed to manage. High deposit growth resulted in large banks that invested in high interest‐bearing USD deposits at the central bank. The central bank financed government debt, exposing the banking sector to sovereign debt. A worsening international economic environment and political fractionalization in a geopolitically sensitive region exacerbated the classic delays arising from taking difficult burden‐sharing, distributional decisions to address the financial crisis.

Source: International Finance

DOI: 10.1111/infi.12459

Authors: Salim Baz, Lara Cathcart, Alexander Michaelides

Institutions: Lebanese American University, Imperial College London

Language: English

Topic: Global Financial Crisis and Policies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $2,900