Dollarization in Lebanon; Advantages and Disadvantages
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This study shows benefits and disadvantages of adopting dollarization in Lebanon and how it affects economic stability. After the 2019 crisis in Lebanon, dollarization was used in the Lebanese economy, since the Lebanese currency depreciated significantly and inflation increased very quickly. This research uses non-numerical and informative methods with the help of scientific studies, financial reports, and articles that support the idea. It shows that dollarization has short- term advantages. Individuals and businesses feel more confident while using the U.S Dollar for all their savings and transactions and keeping their value with greater stability. In addition, if the exchange rate is going up and down, it makes people feel safer. On the other hand, the analysis also shows some disadvantages or drawbacks. Since the Central Bank is the one who controls the money supply and uses the monetary policy, adopting dollarization will take away some of these tasks. In addition to that, decision makers won’t be able to manage inflation and stabilize the economy. In conclusion, even though dollarization can benefit and provides some stability, like everything it also has disadvantages and risks.
Keywords
Currency depreciation, Dollarization, Economic stability, Lebanon, Monetary policy