The Monetary Crisis of Lebanon

Above its traditional currency and debt crisis features, Lebanon’s ongoing crisis sheds the light on the inherent weakness of dollarized monetary systems. This crisis can be seen as a monetary crisis, as the country’s dollarized banking system’s liquidity and solvency problems led to the loss of the “moneyness” of its dollar denominated deposits. We analyze the different dimensions of this crisis and we make policy recommendations, inspired by the experience of the Argentine 2001–2002 convertibility crisis. Finally, we look into the redistributive implications of different conversion scenarios.