Payment Systems In Lebanon

Author : Suheil Abdus-Samad
Publisher :
ISBN 13 :
Total Pages : 216 pages
Book Rating : 4.:/5 (785 download)

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Download or read book The Relationship Between the Balance of Payments, Exchange Rates and Prices written by Suheil Abdus-Samad and published by . This book was released on 1988 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt: The present study examines the relationship between three variables which have been showing major fluctuations in Lebanon over the past years. These three variables comprise the problems of the balance of payments, as well as the latter's consequences on other economic indicators such as exchange rates and prices. For the purpose of rendering the study complete, the root causes behind a balance of payments disequilibrium were detailed, whereby the absorption approach was used for discovering the main factors underlying a balance of payments deficit or surplus. Through the analysis presented, it was revealed that the domestic economy in Lebanon had been a major source for the imbalance in the balance of payments. The decline in domestic output, the rise in domestic expenditures, and the decrease in tax revenues were all factors which contributed to the deterioration in the Lebanese balance of payments when a deficit was witnessed in its variables during the years 1976, 1983, 1984 and 1986. The aim thereafter was to examine the effect of a balance of payments deficit on exchange rates and prices, whereby Sims's test was conducted for studying causality between the three variables at hand. Causality was identified in both directions from any of those variables to the remaining two. Thus, even though a balance of payments deficit in Lebanon had incurred a rise in exchange rates which had, in turn, induced higher inflation, it was concluded that the balance of payments was not the only variable affecting exchange rates. Other major factors had exerted strong pressure on exchange rates and prices, mainly the expectations of higher depreciation in the value of the home currency, as well as higher rates of inflation in the future due to the government's current monetary and fiscal policies. Consequently, with the budget deficits and the public debt running at high rates, an improvement in the exchange rates and prices would be highly improbable even if Lebanon witnesses a surplus in its balance of payments. The policy suggested in this thesis thus emphasized on the necessity for changing the people's prevailing expectations. A number of recommendations were appropriately suggested.