An Initial Empirical Analysis of the Determinants of Lebanese Imports and Exports

Lebanon’s trade sector has been significantly affected by the country’s prolonged economic crisis, particularly following the sharp depreciation of the Lebanese pound and resulting changes in purchasing power and domestic economic activity. Lebanon has historically been characterized by a persistent trade deficit and a highly import-dependent economic structure. Changes in the real exchange rate may influence the competitiveness of Lebanese exports through changes in the relative price of domestic goods in international markets. Understanding these relationships is critical for assessing how real exchange rate fluctuations have affected Lebanon’s trade during a period of significant economic instability.

This study examines the relationship between Lebanon’s real exchange rate and its trade performance, with an emphasis on imports while also incorporating the Lebanese Purchasing Managers’ Index (PMI) as a proxy for income and aggregate demand. Exports are examined separately to provide a wider picture of Lebanon’s trade activity. The analysis uses monthly data and regression analysis to examine the relationship between the relevant variables. For the import analysis, several econometric tests were conducted to check for multicollinearity, autocorrelation and heteroscedasticity. By scrutinizing trade patterns and regression results, the study aims to assess how changes in the real exchange rate and economic conditions are associated with changes in Lebanon’s trade performance during the period studied, and to provide a preliminary look at the determinants of Lebanese exports and imports.

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