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Lebanon—Weathering the Perfect Storms

Author

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  • Axel Schimmelpfennig
  • E. H. Gardner

Abstract

This paper reviews Lebanon's ability to manage financial pressures following severe shocks despite its large public debt overhang and significant external vulnerabilities. Based on interviews with market participants in Beirut and London, the paper concludes that Lebanon's ability to weather what appear to be "perfect storms" derives from three characteristics: a perceived implicit guarantee from donors; Lebanon's track record of having never defaulted on external debt or deposits; and the unique market structure for Lebanese debt which is dominated by local banks and "dedicated" investors and depositors.

Suggested Citation

  • Axel Schimmelpfennig & E. H. Gardner, 2008. "Lebanon—Weathering the Perfect Storms," IMF Working Papers 08/17, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/17
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=21606
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 1-74.
    2. Harald Finger & Mauro Mecagni, 2007. "Sovereign Debt Restructuring and Debt Sustainability; An Analysis of Recent Cross-Country Experience," IMF Occasional Papers 255, International Monetary Fund.
    3. Mendoza, Enrique G. & Ostry, Jonathan D., 2008. "International evidence on fiscal solvency: Is fiscal policy "responsible"?," Journal of Monetary Economics, Elsevier, vol. 55(6), pages 1081-1093, September.
    4. repec:rus:hseeco:123922 is not listed on IDEAS
    5. Jonathan David Ostry & Abdul d Abiad, 2005. "Primary Surpluses and sustainable Debt Levels in Emerging Market Countries," IMF Policy Discussion Papers 05/6, International Monetary Fund.
    6. Steven B. Kamin, 2004. "Identifying the Role of Moral Hazard in International Financial Markets," International Finance, Wiley Blackwell, vol. 7(1), pages 25-59, March.
    7. Thomas Helbling & Sena Eken, 1999. "Back to the Future; Postwar Reconstruction and Stabilization in Lebanon," IMF Occasional Papers 176, International Monetary Fund.
    8. Jose Martelino & S. Nuri Erbas & Adnan Mazarei & Sena Eken & Paul Cashin, 1995. "Economic Dislocation and Recovery in Lebanon," IMF Occasional Papers 120, International Monetary Fund.
    9. Taimur Baig & Ilan Goldfajn, 2000. "The Russian Default and the Contagion to Brazil," IMF Working Papers 00/160, International Monetary Fund.
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    Cited by:

    1. Mora, Nada & Neaime, Simon & Aintablian, Sebouh, 2013. "Foreign currency borrowing by small firms in emerging markets: When domestic banks intermediate dollars," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 1093-1107.

    More about this item

    Keywords

    Debt sustainability; Financial crisis; Investment; Lebanon; Public debt; debt crisis; investors; government debt; central bank; external debt;

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