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Banking Efficiency in Chile: a Profit Frontier Approach

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  • José Luis Carreño G.
  • Gino Loyola F.
  • Yolanda Portilla S.

Abstract

This paper characterizes the evolution of the efficiency X in the Chilean banking industry over 1987 to 2007, based on a profit frontier approach. Our results suggest that over this period the Chilean banking sector has attained just a 15% over its maximum profits. This inefficiency basically arises from a technical source rather than an assignative one, and mainly affects domestic and small banks. Nevertheless, the level of efficiency X of the industry as a whole has dramatically improved since the late 1990’s, which is consistent with important economic, technological and regulatory transformations.

Suggested Citation

  • José Luis Carreño G. & Gino Loyola F. & Yolanda Portilla S., 2010. "Banking Efficiency in Chile: a Profit Frontier Approach," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 13(3), pages 33-65, December.
  • Handle: RePEc:chb:bcchec:v:13:y:2010:i:3:p:33-65
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    References listed on IDEAS

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