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Trends in the efficiency of Federal Reserve check processing operations

Author

Listed:
  • David C. Wheelock
  • Paul W. Wilson

Abstract

The Monetary Control Act of 1980 requires the Federal Reserve to charge customers for financial services, with the intent of improving the efficiency with which Fed offices deliver those services. Prior studies found little improvement in the efficiency of Fed check processing operations after pricing was implemented in 1982. This article examines the efficiency of Fed check operations using a longer sample period (1980:Q1–2003:Q3) than previous studies and new methods for estimating efficiency. The authors find that the median office became somewhat less efficient when pricing was introduced, but that efficiency improved through the 1990s. Although they find that Fed offices became somewhat less efficient on average after 1999, this might reflect adjustments associated with declining check volumes and implementation of a common operating platform across System offices.

Suggested Citation

  • David C. Wheelock & Paul W. Wilson, 2004. "Trends in the efficiency of Federal Reserve check processing operations," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 7-20.
  • Handle: RePEc:fip:fedlrv:y:2004:i:sep:p:7-20:n:v.86no.5
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    File URL: https://files.stlouisfed.org/files/htdocs/publications/review/04/09/Wheelock.pdf
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    References listed on IDEAS

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    1. Bauer, Paul W. & Hancock, Diana, 1993. "The efficiency of the Federal Reserve in providing check processing services," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 287-311, April.
    2. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
    3. Paul W. Bauer & Gary D. Ferrier, 1996. "Scale economies, cost efficiencies, and technological change in Federal Reserve payments processing," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 1004-1044.
    4. Cazals, Catherine & Florens, Jean-Pierre & Simar, Leopold, 2002. "Nonparametric frontier estimation: a robust approach," Journal of Econometrics, Elsevier, vol. 106(1), pages 1-25, January.
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    Citations

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    Cited by:

    1. Wheelock, David C. & Wilson, Paul W., 2008. "Non-parametric, unconditional quantile estimation for efficiency analysis with an application to Federal Reserve check processing operations," Journal of Econometrics, Elsevier, pages 209-225.
    2. Jorge E. Galán and & Miguel Sarmiento, 2008. "Banknote Printing at Modern central Banking: Trends, Costs and Efficiency," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(2), pages 217-262, July-Dece.
    3. García-Alonso, Carlos R. & Salvador-Carulla, Luis & Fernández-Rodríguez, Vicente, 2015. "Evaluation of system efficiency using the Monte Carlo DEA: The case of small health areasAuthor-Name: Torres-Jiménez, Mercedes," European Journal of Operational Research, Elsevier, vol. 242(2), pages 525-535.
    4. Léopold Simar & Paul W. Wilson, 2015. "Statistical Approaches for Non-parametric Frontier Models: A Guided Tour," International Statistical Review, International Statistical Institute, vol. 83(1), pages 77-110, April.
    5. Cristina Suárez & Justo Jorge, 2010. "Efficiency convergence processes and effects of regulation in the nonspecialized retail sector in Spain," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(3), pages 573-597, June.

    More about this item

    Keywords

    Payment systems ; Check collection systems;

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