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« The 2019 Lebanese Financial and Banking Crisis: Understanding the Root Causes and Assessing its Far-Reaching Consequences »
Author(s)
Samar Faouaz , Abou Ltaif
Advisor(s)
Abstract
Purpose: This thesis embarks on a comprehensive examination of Lebanon's financial and banking sector in the context of the 2019 financial crisis, aiming to uncover its root causes, analyze its impacts, and propose pragmatic solutions to foster financial resilience, economic development, and long-term stability. The research addresses the precarious state of Lebanon's financial system, exploring key factors that exacerbated the crisis. It also seeks to offer recommendations for governance reforms and economic recovery strategies.
Design Methodology/ Approach: A mixed-methods approach, integrating both qualitative and quantitative analyses, was employed to provide a holistic understanding of Lebanon’s financial instability. The qualitative component involved comparative case studies of financial crises several countries and semi-structured interviews with policymakers, economists, and financial professionals, while the quantitative analysis utilized regression models based on the Mundell-Fleming framework.
Findings: The study's findings confirm that Lebanon's financial crisis was primarily driven by governance failures, political patronage, and ineffective financial frameworks. Empirical testing of the hypotheses revealed that fiscal policies (H1) and public debt levels (H4) significantly destabilized the economy, while monetary policy adjustments (H2) had mixed impacts. Trade imbalances (H3) further weakened the exchange rate and economic stability, while the effect of tax policies (H5) on stabilizing the economy was minimal. The research highlighted that political factors and institutional weaknesses were more influential than monetary interventions, reinforcing the need for comprehensive fiscal reforms and governance improvements to stabilize Lebanon's financial system.
Originality: This research provides a novel contribution by integrating Keynesian Economics and Institutional Economics to analyze the intersection of economic theory with the realities of Lebanon's political and institutional landscape. The dual theoretical framework offers a fresh lens for understanding how political corruption and weak institutions fuel economic crises.
5
Furthermore, the study's comparative analysis of international financial crises broadens its applicability, suggesting that Lebanon’s situation is part of a broader global challenge facing nations with fragile political and economic systems.
Practical Implications: The findings underscore the urgent need for comprehensive reforms in governance, fiscal management, and institutional accountability in Lebanon. Recommendations include currency stabilization measures, a revitalization of the banking sector, and fiscal deficit resolution. The thesis also advocates for multi-dimensional strategies focusing on SME and productive sector empowerment, market competition, and digital economy development as pivotal to fostering economic growth.
Conclusions/ Recommendations: A multifaceted approach is essential to resolving Lebanon's 2019 crisis. Recommendations include dismantling political patronage networks, implementing fiscal reforms, enhancing regulatory oversight, and promoting financial governance transparency. By prioritizing these measures, Lebanon can build greater financial resilience and establish a pathway toward sustainable recovery and economic development, providing insights for policymakers in fragile states.
Limitations: The primary limitation of this thesis stems from Lebanon's rapidly changing political and economic environment, which made it challenging to maintain the timeliness and accuracy of data. The country's internal instability and external geopolitical pressures created a shifting landscape, complicating the ability to draw fast and definitive conclusions. The dynamic nature of key variables required frequent recalibration of the analysis. Additionally, the lack of transparency in Lebanon's financial institutions, especially in the banking sector, led to reliance on estimations and indirect inferences. To address this, real-time data collection and continuous monitoring were employed, along with a multi-perspective approach to enhance analysis resilience. Bias in interview data was minimized by selecting a diverse group of interviewees and using standardized protocols
Design Methodology/ Approach: A mixed-methods approach, integrating both qualitative and quantitative analyses, was employed to provide a holistic understanding of Lebanon’s financial instability. The qualitative component involved comparative case studies of financial crises several countries and semi-structured interviews with policymakers, economists, and financial professionals, while the quantitative analysis utilized regression models based on the Mundell-Fleming framework.
Findings: The study's findings confirm that Lebanon's financial crisis was primarily driven by governance failures, political patronage, and ineffective financial frameworks. Empirical testing of the hypotheses revealed that fiscal policies (H1) and public debt levels (H4) significantly destabilized the economy, while monetary policy adjustments (H2) had mixed impacts. Trade imbalances (H3) further weakened the exchange rate and economic stability, while the effect of tax policies (H5) on stabilizing the economy was minimal. The research highlighted that political factors and institutional weaknesses were more influential than monetary interventions, reinforcing the need for comprehensive fiscal reforms and governance improvements to stabilize Lebanon's financial system.
Originality: This research provides a novel contribution by integrating Keynesian Economics and Institutional Economics to analyze the intersection of economic theory with the realities of Lebanon's political and institutional landscape. The dual theoretical framework offers a fresh lens for understanding how political corruption and weak institutions fuel economic crises.
5
Furthermore, the study's comparative analysis of international financial crises broadens its applicability, suggesting that Lebanon’s situation is part of a broader global challenge facing nations with fragile political and economic systems.
Practical Implications: The findings underscore the urgent need for comprehensive reforms in governance, fiscal management, and institutional accountability in Lebanon. Recommendations include currency stabilization measures, a revitalization of the banking sector, and fiscal deficit resolution. The thesis also advocates for multi-dimensional strategies focusing on SME and productive sector empowerment, market competition, and digital economy development as pivotal to fostering economic growth.
Conclusions/ Recommendations: A multifaceted approach is essential to resolving Lebanon's 2019 crisis. Recommendations include dismantling political patronage networks, implementing fiscal reforms, enhancing regulatory oversight, and promoting financial governance transparency. By prioritizing these measures, Lebanon can build greater financial resilience and establish a pathway toward sustainable recovery and economic development, providing insights for policymakers in fragile states.
Limitations: The primary limitation of this thesis stems from Lebanon's rapidly changing political and economic environment, which made it challenging to maintain the timeliness and accuracy of data. The country's internal instability and external geopolitical pressures created a shifting landscape, complicating the ability to draw fast and definitive conclusions. The dynamic nature of key variables required frequent recalibration of the analysis. Additionally, the lack of transparency in Lebanon's financial institutions, especially in the banking sector, led to reliance on estimations and indirect inferences. To address this, real-time data collection and continuous monitoring were employed, along with a multi-perspective approach to enhance analysis resilience. Bias in interview data was minimized by selecting a diverse group of interviewees and using standardized protocols
Date Issued
2024-12
Publisher
School of Business Administration : Department of Accounting, Economics and Finance
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PhD THESIS- Samar Abou Ltaif fall 24_TC3.pdf
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main article
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