This paper extends Ahn et al. (2000) from the adaptive expectations to a multi- period forward-looking rational expectations model that allows us to derive a dynamic cost frontier suitable for describing the production process of commercial banks. Faced with quasi-fixed inputs and adopting innovations in a sluggish manner, banks are usually unable to adjust their production inefficiencies instantaneously. This leads to a dynamic panel data cost model, which can be used to estimate and to compare the production efficiency, adjustment speeds toward long-run steady state, and scale and scope economies for the commercial banks of West and East European countries. The adjustment speeds of the banks in the West European countries are found to be faster than those of the banks in the East European countries. In addition, scale and scope economies prevail in the sample countries.
|Original language||Traditional Chinese|
|Number of pages||33|
|Publication status||Published - 2008|
- Dynamic cost frontier
- Technical efficiency
- Adjustment speed