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Banking Inefficiency in Central and Eastern European countries under a Quadratic Loss Function




This paper employs a specification of a quadratic loss function based on forward looking rational expectations to model the underlying dynamics of efficiency scores in the banking industry of eleven Central and Eastern European countries over the period 1998-2005. Results show that there is considerable variation in the adjustment speed to the long run equilibrium across banking systems and over time, while it also appears that the recent accession to the EU has not led to the expected increase in the speed of adjustment to the long run equilibrium. Moreover, banks’ ownership structure appears to assert an influence on the speed at which credit institutions correct their past-period inefficiency.

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  • Anastasia Koutsomanoli-Filippaki & Emmanuel Mamatzakis, 2008. "Banking Inefficiency in Central and Eastern European countries under a Quadratic Loss Function," Discussion Paper Series 2008_11, Department of Economics, University of Macedonia, revised Sep 2008.
  • Handle: RePEc:mcd:mcddps:2008_11

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    Cited by:

    1. Hryckiewicz, Aneta & Kowalewski, Oskar, 2010. "Economic determinates, financial crisis and entry modes of foreign banks into emerging markets," Emerging Markets Review, Elsevier, vol. 11(3), pages 205-228, September.
    2. Maghyereh, Aktham I. & Awartani, Basel, 2012. "Financial integration of GCC banking markets: A non-parametric bootstrap DEA estimation approach," Research in International Business and Finance, Elsevier, vol. 26(2), pages 181-195.
    3. Kodongo, Odongo & Natto, Dinah & Biekpe, Nicholas, 2015. "Explaining cross-border bank expansion in East Africa," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 36(C), pages 71-84.
    4. Olson, Dennis & Zoubi, Taisier A., 2011. "Efficiency and bank profitability in MENA countries," Emerging Markets Review, Elsevier, vol. 12(2), pages 94-110, June.
    5. Khosravi, Taha, 2015. "The bank lending channel: An empirical analysis of EU accession countries from 2004-2013," MPRA Paper 66795, University Library of Munich, Germany.
    6. repec:eee:riibaf:v:41:y:2017:i:c:p:260-279 is not listed on IDEAS

    More about this item


    Speed of adjustment; long run equilibrium; rational expectations; banking inefficiency.;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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