The role of political events and political expectations in exchange rate movements: The case of Lebanon.

Format:

Book

Thesis/Dissertation

Author/Creator:

Byker, Gaylen James.

Contributor:

Jacque, Laurent, advisor.

University of Pennsylvania.

Language:

English

Subjects (All):

International law.

Finance.

0508.

0616.

Penn dissertations--International relations.

International relations--Penn dissertations.

Local Subjects:

Penn dissertations--International relations.

International relations--Penn dissertations.

0508.

0616.

Physical Description:

248 pages

Contained In:

Dissertation Abstracts International 54-07A.

System Details:

Mode of access: World Wide Web.

text file

Summary:

The events of the Lebanese War between 1975 and 1985 provide an opportunity to examine the effects of repeated major political events and related political expectations on exchange rate movements in a small open economy with a floating exchange rate. This study draws on the literature of economics, finance, cognitive psychology and political science to establish a theoretical framework within which to explore the formation and change of expectations, the role of information, the aggregation of individual expectations and actions and the heuristics and biases that were part of the "learning" process that occurred in Lebanon during the War years. There is a detailed overview of Lebanese social, political, economic and monetary history. Two sets of quantitative political events data were obtained and a twenty-five-week survey of the expectations of a cross section of Lebanese foreign exchange market participants was conducted. Concepts of "adaptive expectations" and "adaptive economic behavior" are used to explain the narrative, graphic, quantitative and survey evidence assembled and to evaluate eight propositions about the relationship of political events and expectations to the Lebanese pound/U.S. dollar exchange rate during the War years. The principal impact of political events and expectations is found to be indirect, through their impact on the Lebanese economy and on Government fiscal and monetary practices. Political events and expectations were found to have had a direct impact only during the two-year period from the end of the Israeli invasion in the fall of 1982 through the summer of 1984. Subsequently, political events and expectations were overwhelmed by adverse economic developments and expectations about the collapse of the exchange rate itself. During the latter period, only positive news, news of "cooperation," remained salient and had a systematic impact on the exchange rate. The results of the survey of expectations demonstrated that the Lebanese foreign exchange market was not "efficient" in the sense that the spot rate already incorporated all available information and expectations.

Notes:

Thesis (Ph.D. in International Relations) -- Graduate School of Arts and Sciences, University of Pennsylvania, 1993.

Source: Dissertation Abstracts International, Volume: 54-07, Section: A, page: 2721.

Supervisor: Laurent Jacque.

Local Notes:

School code: 0175.

Access Restriction:

Restricted for use by site license.