Inefficiency and heterogeneity in Turkish banking: 1990-2000

Hulusi Inanoglu and Mahmoud El-Gamal
Additional contact information
Hulusi Inanoglu: Office of the Comptroller of the Currency, US Treasury Department, Washington, DC, USA, Postal: Office of the Comptroller of the Currency, US Treasury Department, Washington, DC, USA

Journal of Applied Econometrics, 2005, vol. 20, issue 5, 641-664

Abstract: Recent studies have stressed the importance of privatization and openness to foreign competition for bank efficiency and economic growth. We study bank efficiency in Turkey, an emerging economy with great heterogeneity in bank types and ownership structures. Earlier studies of Turkish banking had three limitations: (i) excessive reliance on cost-function frontier analyses, wherein volume of loans is a measure of banking output; (ii) pooling all banks or imposing ad hoc heterogeneity assumptions; and (iii) lack of a comprehensive panel data set for proper analysis of productivity and heterogeneity. We use an estimation-classification procedure to find likelihood-driven classification of bank technologies in an 11-year panel. In addition, we augment traditional cost-frontier analysis with a labour-efficiency analysis. We conclude that state banks are not particularly inefficient overall, but that they do utilize labour inefficiently. This partially supports recent calls for privatization. We also conclude that special finance houses (or Islamic banks) utilize the same technology as conventional domestic banks, and do so relatively efficiently. This suggests that they do not cause harm to the financial system. Finally, we conclude that foreign banks utilize a different technology from domestic ones. This suggests that one should not overstate their value to the financial sector. Copyright © 2005 John Wiley & Sons, Ltd.

Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

Downloads: (external link)
http://hdl.handle.net/10.1002/jae.835 Link to full text; subscription required (text/html)
http://qed.econ.queensu.ca:80/jae/2005-v20.5/ Supporting data files and programs (text/html)

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:jae:japmet:v:20:y:2005:i:5:p:641-664

Ordering information: This journal article can be ordered from
http://www3.intersci ... e.jsp?issn=0883-7252

DOI: 10.1002/jae.835

Access Statistics for this article

Journal of Applied Econometrics is currently edited by M. Hashem Pesaran

More articles in Journal of Applied Econometrics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().