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

Anastasia Koutsomanoli-Filippaki and Emmanuel Mamatzakis

Economic Modelling, 2010, vol. 27, issue 1, 1-11

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.

Keywords: Speed; of; adjustment; Rational; expectations; Cost; inefficiency (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264-9993(09)00115-1
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:27:y:2010:i:1:p:1-11

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().