{"id":255060,"date":"2025-10-02T16:46:52","date_gmt":"2025-10-02T14:46:52","guid":{"rendered":"https:\/\/sada.ly\/en\/?p=255060"},"modified":"2025-10-02T16:46:52","modified_gmt":"2025-10-02T14:46:52","slug":"helmi-al-gmati-the-decline-of-the-dollar-real-stability-or-a-fleeting-illusion-deceiving-the-markets","status":"publish","type":"post","link":"https:\/\/sada.ly\/en\/helmi-al-gmati-the-decline-of-the-dollar-real-stability-or-a-fleeting-illusion-deceiving-the-markets\/","title":{"rendered":"Helmi Al-Gmati: “The Decline of the Dollar\u2026 Real Stability or a Fleeting Illusion Deceiving the Markets?”"},"content":{"rendered":"\n

Economics Professor at the University of Benghazi, Helmi Al-Gmati<\/strong>, writes:<\/p>\n\n\n\n

The fall in the dollar\u2019s exchange rate on the parallel market does not automatically or immediately translate into a similar drop in prices.
The relationship exists, but it is constrained by several factors: the sustainability of the decline, the extent to which import needs are practically covered, traders\u2019 behavior (asymmetric flexibility), the degree of market integration, and underlying inflationary pressures.<\/p>\n\n\n\n

1. Transmission Mechanism<\/h3>\n\n\n\n

a) Exchange rate affects import costs \u2192 replacement and production costs \u2192 final selling prices.
b) The time horizon matters: the initial impact shifts expected costs, while the full effect appears gradually as inventories are renewed and contracts updated.<\/p>\n\n\n\n

2. The Pass-through Concept<\/h3>\n\n\n\n

We define (\u03b2SR) as the short-term pass-through coefficient, and (\u03b2LR) as the long-term one.<\/p>\n\n\n\n

    \n
  • In economies suffering from market distortions and lack of confidence (as with exchange rate instability), expected values are typically:
    \u03b2SR = 0.1\u20130.3<\/strong> and \u03b2LR = 0.4\u20130.7<\/strong>.<\/li>\n\n\n\n
  • This means: a temporary drop in the exchange rate reduces prices only slightly and after some delay, whereas a sustained decline produces a larger and longer-lasting effect.<\/li>\n<\/ul>\n\n\n\n

    3. Temporary vs. Sustained Decline<\/h3>\n\n\n\n

    a) Temporary:<\/strong> Caused by short-term injections (opening letters of credit\/short allocations). This affects the parallel market briefly; traders maintain high profit margins and refrain from lowering prices, anticipating a rebound. Result: minimal and unsustainable impact on consumer prices.
    b) Sustained:<\/strong> Requires continuity of foreign currency supply (regular credit schedules, stable dollar liquidity in banks, and market confidence). In this case, inventories are renewed at lower costs, leading to tangible declines in import prices and, indirectly, a deflationary impact on overall inflation.<\/p>\n\n\n\n

    4. Market Players\u2019 Behavior<\/h3>\n\n\n\n
      \n
    • Traders:<\/strong> Quickly reflect dollar increases but reduce prices slowly \u2014 the \u201casymmetric pricing\u201d phenomenon.<\/li>\n\n\n\n
    • Consumers:<\/strong> Slow to perceive improvements unless there is a clear and sustained decline in key goods.<\/li>\n\n\n\n
    • Speculators\/Parallel market brokers:<\/strong> Treat short-term injections as temporary price dips, restoring demand to push rates back up once coverage fades.<\/li>\n<\/ul>\n\n\n\n

      5. Key Indicators to Monitor<\/h3>\n\n\n\n

      a) Frequency and volume of import credits opened.
      b) Banks\u2019 reserves of usable foreign currency (import inflows vs. withdrawal outflows).
      c) Parallel market trading volumes and price volatility (daily standard deviation).
      d) Merchants\u2019 inventory renewal (days of coverage) and their latest purchase prices.
      e) Inflation expectations index (via surveys or bond yields, if available).<\/p>\n\n\n\n

      Simplified Scenarios (Qualitative Illustration)<\/h3>\n\n\n\n
        \n
      • Scenario A \u2014 Short-term drop:<\/strong> One-off or limited dollar injections. Parallel market declines temporarily \u2192 weak short-term pass-through \u2192 consumer prices barely change.<\/li>\n\n\n\n
      • Scenario B \u2014 Sustained decline:<\/strong> Regular credits covering real needs over several months \u2192 permanent parallel market decline \u2192 traders replenish stocks at new lower prices \u2192 noticeable drop in imported goods\u2019 prices and gradual inflation slowdown.<\/li>\n<\/ul>\n\n\n\n

        Policy Recommendations & Practical Measures<\/h3>\n\n\n\n
          \n
        1. Sustainability over shock:<\/strong> Credit policy must be regular and predictable.<\/li>\n\n\n\n
        2. Communication and transparency:<\/strong> Regular data on credit allocations and import volumes help reduce speculation.<\/li>\n\n\n\n
        3. Short-term solidarity measures:<\/strong> Incentives to lower prices (e.g., price arbitration mechanisms or reduced tariffs on essential goods when costs fall).<\/li>\n\n\n\n
        4. Monitoring indicators:<\/strong> Develop a \u201cdashboard\u201d tracking reserves, parallel market volumes, and merchants\u2019 inventory levels.<\/li>\n<\/ol>\n\n\n\n

          Conclusion<\/h3>\n\n\n\n

          The point is that the recent fall in the dollar on the parallel market may be good news, but citizens will not feel it directly unless the decline is structured and sustainable through clear institutional and coverage policies.<\/p>\n\n\n\n

          The real solution is not a one-time price shock but building continuous trust in the currency market and in transparent, regular import and supply mechanisms. Only then can a lower dollar exchange rate truly translate into lower daily consumer prices.<\/p>\n\n\n\n

          <\/p>\n","protected":false},"excerpt":{"rendered":"

          Economics Professor at the University of Benghazi, Helmi Al-Gmati, writes: The fall in the dollar\u2019s exchange rate on the parallel market does not automatically or immediately translate into a similar drop in prices.The relationship exists, but it is constrained by several factors: the sustainability of the decline, the extent to which import needs are practically […]<\/p>\n","protected":false},"author":13,"featured_media":255061,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[683],"tags":[617,800,613],"class_list":["post-255060","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economic-articles","tag-currency","tag-dollar","tag-libya"],"acf":[],"_links":{"self":[{"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/posts\/255060","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/comments?post=255060"}],"version-history":[{"count":1,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/posts\/255060\/revisions"}],"predecessor-version":[{"id":255062,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/posts\/255060\/revisions\/255062"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/media\/255061"}],"wp:attachment":[{"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/media?parent=255060"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/categories?post=255060"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/tags?post=255060"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}