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

22 Pages Posted: 13 Oct 2009

See all articles by Harald Finger

Harald Finger

International Monetary Fund (IMF)

Heiko Hesse

International Monetary Fund (IMF)

Date Written: September 2009

Abstract

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.

Keywords: Bank soundness, Banking sector, Commercial banks, Demand for money, Depositories, Economic models, Financial systems, Lebanon, Liquidity, Profits

Suggested Citation

Finger, Harald and Hesse, Heiko, Lebanon-Determinants of Commercial Bank Deposits in a Regional Financial Center (September 2009). IMF Working Paper No. 09/195, Available at SSRN: https://ssrn.com/abstract=1486513

Harald Finger (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Heiko Hesse

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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