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. 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.

AppendixTables A1.1. Fund Arrangements During Recent Sovereign-Debt-Restructuring Episodes A3.1. Evolution of Debt-to-GDP Ratios Since the Crises A4.1. Probit Estimation of Crisis Probability A4.2. Polynomial Fit Through In-Sample Forecasts Appendix Figures A3.1. Change in Debt-to-GDP Ratios, Post-restructuring Period A3.2. Contribution of Primary Balance to Change in Debt-to-GDP Ratio, Post-restructuring Period A3.3. Contribution of Exchange Rate to Change in Debt-to-GDP Ratio, Post-restructuring Period A3.4. Contribution of Interest-Growth Differential to Change in Debt-to-GDP Ratio, Post-restructuring Period BibliographyThe following conventions are used in this publication:In tables, a blank cell indicates "not applicable," ellipsis points ( . . .) indicate "not available," and 0 or 0.0 indicates "zero" or "negligible." Minor discrepancies between sums of constituent figures and totals are due to rounding.An en dash (-) between years or months (for example, 2005-06 or January-June) indicates the years or months covered, including the beginning and ending years or months; a slash or virgule (/) between years or months (for example, 2005/06) indicates a fiscal or financial year, as does the abbreviation FY (for example, FY2006)."Billion" means a thousand million; "trillion" means a thousand billion."Basis points" refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).As used in this publication, the term "country" does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.

Finger, and an IMF Staff Team 2 Authorized for distribution by Siddharth Tiwari June 2015 DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

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While the world is focused on addressing the near-term ramifications of the COVID-19 shock, we turn attention to another important aspect of the pandemic: its fallout on medium-term potential output through scarring. Taking Australia and New Zealand as examples, we show that the pandemic will likely have a large and persistent impact on potential output, broadly in line with the experience of advanced economies from past recessions. The impact is driven by employment, capital stock, and productivity losses in the wake of an unprecedented sectoral reallocation, hightened uncertainty, and reduced migration. Maintaining fiscal and monetary policy support until the recovery is firmly entrenched and putting in place a strong structural policy agenda to counter the pandemic’s adverse effects on medium-term potential output will be important to support standards of living and strengthen economic resilience in case of renewed shocks.