Abstract
This paper examines the impacts of political uncertainty on the currency exchange rate, taking the fluctuation of the LBP exchange rate against USD dollar in the black market as a practical case. It shed light on the most important political events and decisions that happened in Lebanon and the region during the period (2019-2021) and linked it directly to the currency exchange rate, to show the impacts of the political instability on the LBP/USD exchange rate. We depend on the daily observations of the LBP exchange rate in the central bank and black market to perform empirical tests and regression models and we gathered the political events and news from the National News Agency (NNA). The results show that political uncertainty and instability have a direct impact on the currency exchange rate.
Highlights
Politics considered as a set of activities and practices carried out by governments which helps in setting up the general frameworks for the economic, financial and social policies that serve the interests of states and their people
We address the impacts of political uncertainty on the currency exchange rate, taking the LBP exchange rate against USD dollar in the black market as a practical case
We examine the variables of the study during the period [2019-2021] and apply the regression analysis depending on the collected data from the Central bank, black market and National News Agency in order to understand the impacts of the political uncertainty on the currency exchange rate
Summary
Politics considered as a set of activities and practices carried out by governments which helps in setting up the general frameworks for the economic, financial and social policies that serve the interests of states and their people. Political situations such as uncertainty and instability have a lot of impacts on the financial and economic sector especially on the currency exchange rate. A dummy variable equation was developed in order to capture the impacts of the political uncertainty on the currency exchange rate through mentioning for the political events that happened during the studied period in Lebanon. The political atmosphere controls the exchange rate of LBP on the black market, with every positive or negative political event, we see an improvement or a decrease in the value of the Lebanese pound against USD dollar on the black market
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