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The Economics of Bounced Checks in Lebanon

Author

Listed:
  • Samih Antoine Azar

    (Faculty of Business Administration and Economics, Haigazian University, Beirut, Lebanon,)

  • Said Elfakhani

    (Olayan School of Business, American University of Beirut, Beirut, Lebanon,)

  • Khaled Abdallah

    (Doctor in International Business Law and Bekaa District Investigating Judge, Lebanon.)

Abstract

The purpose of this paper is to identify the variables that determine or explain the supply of bounced checks, either issued in Lebanese pounds or issued in US dollars. This is an area that the extant empirical research fails to cover, and hence, this paper is, by itself, quite innovative. Four major explanatory variables are identified. Two of them are structural, and the other two are under the control of a bank on its own, and of the central bank, or at least of the Association of Banks. The high values of the goodness-of-fit, the favorable econometric diagnostics, and the failure to reject stability, all point to the same direction: The models have all the necessary characteristics to predict correctly bounced checks. In case actual bounced checks are consistently and persistently higher than those predicted by the models, corrective action can be taken to avert a financial crisis. The first action is that banks can control the amount of loans they extend to their clientele. And the second action is by a manipulation of interest rates. It is understood that these two actions should be used sparingly and only in a case of financial crisis.

Suggested Citation

  • Samih Antoine Azar & Said Elfakhani & Khaled Abdallah, 2017. "The Economics of Bounced Checks in Lebanon," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 106-114.
    • Handle: RePEc:eco:journ1:2017-01-16
    as

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    References listed on IDEAS

    as
    1. Marc Fusaro, 2008. "Hidden Consumer Loans: An Analysis of Implicit Interest Rates on Bounced Checks," Journal of Family and Economic Issues, Springer, vol. 29(2), pages 251-263, June.
    2. Ekrem Erdem & Can Tansel Tugcu, 2015. "Business ethics and economic growth: An empirical analysis for Turkish economy," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 8(3), pages 7-12, December.
    3. Marc Fusaro & Richard Ericson, 2010. "The Welfare Economics of “Bounce Protection” Programs," Journal of Consumer Policy, Springer, vol. 33(1), pages 55-73, March.
    4. Marc Fusaro, 2009. "The rank, stock, order and epidemic effects of technology adoption: an empirical study of bounce protection programs," The Journal of Technology Transfer, Springer, vol. 34(1), pages 24-42, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Bounced Checks; Multiple Regression Models; Econometric Prediction; Banks; Lebanon;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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