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Sustainability of Budget Deficits and Public Debt in Lebanon: A Stationarity and Co-Integration Analysis

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  • Neaime Simon

    (Department of Economics, Institute of Financial Economics, American University of Beirut)

Abstract

This paper presents a thorough empirical analysis of fiscal developments in Lebanon over the past three decades. After an evaluation of major fiscal and monetary developments, the paper uses the Present Value Constraint framework to analyze whether debt and deficits are sustainable. Unit root and co-integration tests reveal that public debt in Lebanon is not sustainable. It is also shown that Lebanon could be heading towards a debt and exchange rate crisis, which could degenerate into a banking crisis similar to the one observed in Argentina, unless timely fiscal adjustment measures are introduced in the near future.

Suggested Citation

  • Neaime Simon, 2004. "Sustainability of Budget Deficits and Public Debt in Lebanon: A Stationarity and Co-Integration Analysis," Review of Middle East Economics and Finance, De Gruyter, vol. 2(1), pages 42-60, April.
    • Handle: RePEc:bpj:rmeecf:v:2:y:2004:i:1:n:3
    DOI: 10.2202/1475-3693.1019
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    References listed on IDEAS

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    Cited by:

    1. Neaime, Simon & Gaysset, Isabelle, 2017. "Sustainability of macroeconomic policies in selected MENA countries: Post financial and debt crises," Research in International Business and Finance, Elsevier, vol. 40(C), pages 129-140.
    2. Harvie, Charles & Saleh, Ali Salman, 2007. "Lebanon’s Fiscal Crisis and Economic Reconstruction after War: the case of a bridge too far?," Economics Working Papers wp07-04, School of Economics, University of Wollongong, NSW, Australia.
    3. Zeaiter, Hussein & El-Khalil, Raed, 2016. "Extreme bounds of sovereign defaults: Evidence from the MENA region," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 391-410.
    4. Harvie, Charles & Saleh, Ali Salman, 2008. "Lebanon's economic reconstruction after the war: A bridge too far?," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 857-872.

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