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Lebanon-Determinants of Commercial Bank Deposits in a Regional Financial Center

Author/Editor: Finger, Harald | Hesse, Heiko
Authorized for Distribution: September 1, 2009
Electronic Access: Free Full Text (PDF file size is 1,165KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: This paper empirically examines the demand for commercial bank deposits in Lebanon, a regional financial center. With Lebanon's high fiscal deficits financed largely by domestic commercial banks that rely on deposit funding, deposit growth is a key variable to assess government financing conditions. At the macro level, we find that domestic factors such as economic activity, prices, and the interest differential between the Lebanese pound and the U.S. dollar are significant in explaining deposit demand, as are external factors such as advanced economy economic and financial conditions and variables proxying the availability of funds from the Gulf. Impulse response functions and variance decomposition analyses underscore the relative importance of the external variables. At the micro level, we find that in addition, bank-specific variables, such as the perceived riskiness of individual banks, their liquidity buffers, loan exposure, and interest margins, bear a significant influence on the demand for deposits.
 
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Series: Working Paper No. 09/195
Subject(s): Bank soundness | Banking sector | Commercial banks | Demand for money | Depositories | Economic models | Financial systems | Lebanon | Liquidity | Profits
Author's keyword(s): Deposits | deposit demand | Lebanon | money demand | panel regressions | regional financial center | VECM
 
English  
    Published:   September 1, 2009        
            Format:   Paper
    Stock No:   WPIEA2009195   Pages:   21
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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