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Cost Efficiency, Scale Economies, and Technological Progress in Turkish Banking

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  • Adnan Kasman
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    Abstract

    This paper uses a three input–three output Fourier-flexible cost function specification to investigate cost efficiency, scale economies, and technological progress in the Turkish banking system over the period 1988-1998. Our findings suggest that the Turkish banking system has a significant inefficiency problem. Although the annual inefficiency average decreased over the sample period due to the financial liberalization, commercial banks in the sector operated more inefficiently than their U.S. and European counterparts. The results suggest the existence of significant economies of scale for all groups in the sample and no evidence of diseconomies of scale even for larger banks. The results also indicate the existence of technological progress between 1988 and 1991.

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    File URL: http://www.tcmb.gov.tr/research/cbreview/jan02-1.pdf
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    Bibliographic Info

    Article provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its journal Central Bank Review.

    Volume (Year): 2 (2002)
    Issue (Month): 1 ()
    Pages: 1-20

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    Handle: RePEc:tcb:cebare:v:2:y:2002:i:1:p:1-20

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    Related research

    Keywords: Cost Efficiency; Technological Progress; Fourier-Flexible Cost Function; Banking;

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    References

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    1. Berger, Allen N. & Hunter, William C. & Timme, Stephen G., 1993. "The efficiency of financial institutions: A review and preview of research past, present and future," Journal of Banking & Finance, Elsevier, Elsevier, vol. 17(2-3), pages 221-249, April.
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    Cited by:
    1. Bank for International Settlements, 2006. "The banking system in emerging economies: how much progress has been made?," BIS Papers, Bank for International Settlements, Bank for International Settlements, number 28, 8.
    2. George Assaf, A. & Matousek, Roman & Tsionas, Efthymios G., 2013. "Turkish bank efficiency: Bayesian estimation with undesirable outputs," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(2), pages 506-517.
    3. Dániel Holló & Márton Nagy, 2006. "Bank Efficiency in the Enlarged European Union," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), The banking system in emerging economies: how much progress has been made?, volume 28, pages 217-35 Bank for International Settlements.
    4. Anca Podpiera & Jiri Podpiera, 2005. "Deteriorating Cost Efficiency in Commercial Banks Signals an Increasing Risk of Failure," Working Papers, Czech National Bank, Research Department 2005/06, Czech National Bank, Research Department.
    5. Fukuyama, Hirofumi & Matousek, Roman, 2011. "Efficiency of Turkish banking: Two-stage network system. Variable returns to scale model," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 21(1), pages 75-91, February.
    6. Margono, Heru & Sharma, Subhash C. & Melvin II, Paul D., 2010. "Cost efficiency, economies of scale, technological progress and productivity in Indonesian banks," Journal of Asian Economics, Elsevier, Elsevier, vol. 21(1), pages 53-65, February.

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