Trade Deficits, Net Foreign Assets, and Exchange Rates: A Note on Lebanon

Without doubt, the most widely watched economic indicator in Lebanon these days is BDL’s foreign assets. The reason used to be that it reflected BDL’s ability to support the fixed exchange rate; but nowadays it simply reflects BDL’s ability to finance the trade deficit and to subsidize essential goods. However, though this variable is understandably important, the more crucial variable to watch is net foreign assets.

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Exchange Rates Note on Lebanon

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