Estimating the speed of adjustment of European banking efficiency under a quadratic loss function

Koutsomanoli-Fillipaki, Anastasia and Mamatzakis, Emmanuel C (2010) Estimating the speed of adjustment of European banking efficiency under a quadratic loss function. Economic Modelling, 27 (1). pp. 1-11. ISSN 0264-9993

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Abstract

This paper investigates the speed of adjustment of cost efficiency to equilibrium level in the European banking industry. Our analysis provides for the first time insights into the process of convergence across European banking markets as measured by the speed of adjustment of cost efficiency. In particular, we employ a quadratic loss function specification based on forward-looking rational expectations to model the underlying dynamics of efficiency scores in the banking industry of the EU-15 region over the period 1998–2005. Results show that there is considerable variation in the speed of adjustment across banking systems, while over time it appears that continuing efforts to advance financial integration have led to some improvement in the speed of adjustment to the long-run equilibrium.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences
Depositing User: Janet Snow
Date Deposited: 03 Jul 2012 11:17
Last Modified: 03 Jul 2012 11:17
URI: http://sro.sussex.ac.uk/id/eprint/40012
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