Lebanon's Eventual Transition to a Floating Exchange Rate System: Balancing Flexibility with Stability

Roudy Sassine

Economics Working Paper Archive from Levy Economics Institute

Abstract: Lebanon's longstanding fixed exchange rate regime collapsed in the wake of the country's 2019 financial crisis. This paper examines the underlying monetary factors that contributed to the collapse, offering a new policy framework based on a floating exchange rate system and detailing its superior qualities. However, the paper cautions against a hasty transition without strengthening economic fundamentals. Instead, it argues that transition should proceed first by adopting a managed float, during which the country can increase its fiscal space to enable increased investment in idle capacity and the productive sectors, balancing flexibility with financial stability. Further economic imperatives must be addressed before a fully floating regime can be adopted. The paper concludes by outlining a roadmap for a smooth transition from the fixed exchange rate to a managed float and finally to a fully floating system.

Keywords: Financial crisis; Monetary policy; Monetary sovereignty (search for similar items in EconPapers)
JEL-codes: F30 N10 N14 P16 (search for similar items in EconPapers)
Date: 2025-10
New Economics Papers: this item is included in nep-ara, nep-mon and nep-opm
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.levyinstitute.org/wp-content/uploads/2025/10/wp_1094.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lev:wrkpap:wp_1094

Access Statistics for this paper

More papers in Economics Working Paper Archive from Levy Economics Institute
Bibliographic data for series maintained by Lindsey Carter ().