This paper investigates X-efficiency and productivity change in Australian banking between 1995 and 1999 using Data Envelopment Analysis (DEA) and Malmquist productivity indexes. It differs from earlier studies by examining efficiency by bank type, and finds that regional banks are less efficient than other bank types. The study concludes that diseconomies of scale set in very early and hence are not a sufficient basis on which to allow mergers between large banks to proceed. Total factor productivity in the banking sector was found to have increased by an average annual 7.6 per cent between 1995 and 1999. All of the productivity increase was due to technological advance shifting out the frontier. The banking sector's performance was less efficient relative to the frontier in 1999 than it had been in 1995. Copyright Blackwell Publishing Ltd/University of Adelaide and Flinders University of South Australia 2004.

No abstract

No abstract

This paper examines two issues pertinent to the effective implementation of monetary policy: firstly, the ability of the monetary authorities to control interest rates and secondly, whether interest rates have exhibited a leading, relationship with economic activity since deregulation of the financial markets. If expenditures are unresponsive to changes in interest rates it is shown that the monetary authorities have the ability to determine the interest rate but if the authorities attempt to push interest rates into regions in which expenditures become interest rate elastic, a role for liquidity preference in determination of the interest rate is restored. This limits the effects of discretionary monetary policy to the short-term. Previous empirical studies, graphs and correlation coefficients indicate only limited evidence for a negative association between interest rates and changes in economic activity whereas Granger causality tests indicate that predictable relationships between interest rates and economic activity have existed in Australia for the period in which financial markets have been deregulated.