<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The central bank of Lebanon adopted exchange rate targeting in 1994 and it has exploited several instruments (particularly interest rate) since then to stimulate foreign financial inflows. This study aims at testing the impact of this strategy on economic performance and welfare in both the short- and long-run. In this regard, we exploit monthly data covering the period January 2002-June 2017 and implement cointegration analysis and VEC model. The empirical results suggest that monetary tools exploited by the central bank of Lebanon depress economic growth in the long-run. Moreover, despite their importance for external balance, financial inflows may hinder economic activity in both short- and long-run. On the other hand, monetary policy transmission channels through bank credit and capital play a constructive role for GDP growth.</p></abstract>

The central bank of Lebanon adopted exchange rate targeting in 1994 and it has exploited several instruments (particularly interest rate) since then to stimulate foreign financial inflows. This study aims at testing the impact of this strategy on economic performance and welfare in both the short- and long-run. In this regard, we exploit monthly data covering the period January 2002-June 2017 and implement cointegration analysis and VEC model. The empirical results suggest that monetary tools exploited by the central bank of Lebanon depress economic growth in the long-run. Moreover, despite their importance for external balance, financial inflows may hinder economic activity in both short- and long-run. On the other hand, monetary policy transmission channels through bank credit and capital play a constructive role for GDP growth.

Monetary Policy and Economic Growth in Lebanon

Faculty of Economics and Business Administration

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

{"article-title":"Monetary Policy and Economic Growth in Lebanon"}

The central bank of Lebanon adopted exchange rate targeting in 1994 and it has exploited several instruments (particularly interest rate) since then to...

Monetary Policy and Economic Growth in Lebanon

Published Online: May 22, 2019

Page range: 147 - 171

Received: Jan 23, 2018

Accepted: Jun 12, 2018

DOI: https://doi.org/10.2478/jcbtp-2019-0018

Keywords
Monetary policy transmission channels, Financial Inflows, Economic growth, Vector Error Correction Model

© 2019 Ali Awdeh, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Monetary Policy and Economic Growth in Lebanon

Published Online: May 22, 2019

Page range: 147 - 171

Received: Jan 23, 2018

Accepted: Jun 12, 2018

DOI: https://doi.org/10.2478/jcbtp-2019-0018

KeywordsMonetary policy transmission channels, Financial Inflows, Economic growth, Vector Error Correction Model

© 2019 Ali Awdeh, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
Monetary policy transmission channels, Financial Inflows, Economic growth, Vector Error Correction Model