What Drives the Lebanese Exchange Rate in the Parallel Market?

The severity of the Lebanese economic crisis that has been raging on for more than two years can perhaps be best encapsulated by the behavior of the exchange rate: from July 2019 to November 2021 the average exchange rate in the parallel market moved from 1,515 LBP to 22,900 LBP per the USD, a loss close to 1500%. That the Lebanese exchange rate was overvalued is a moot point, but the depreciations that the currency has witnessed were drastic and perhaps beyond any equilibrium level. What is remarkable about the Lebanese situation is the context in which the exchange rate kept depreciating: the almost complete absence of positive economic news, including any corrective policy actions, and the almost uninterrupted barrage of negative political events.

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What Drives the Lebanese Exchange Rate in the Parallel Market

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