Financial-Firm Production of Monetary Services: A Generalized Symmetric Barnett Variable-Profit-Function Approach

Barnett, William A.; Hahm, Jeong Ho

doi:10.2307/1391922

Cited by 6 publications

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“…Similarly, the left-hand side (LHS) of a bank's balance sheet is called the F. Hasan American Journal of Operations Research financial outputs which does not qualify everything on this side to be an output of the production process of a bank. Barnett (1987), Hancock (1985) [5], Barnett and Hahm (1994) [6] are some papers outlining economic modelling of banks as firms. In particular Barnett 1987, economic model of banks production process is used in this paper to define outputs and inputs of a bank.…”

Section: F Hasanmentioning

confidence: 99%

A Nonparametric and Aggregation Theoretic Approach for Measuring Productivity of US Banks during 2006-2016

Hasan¹

2022

AJOR

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Existing literature related to efficiency measurement and productivity analysis of banks is swarmed with the input-output classification of banks based on using accounting conventions. This usage varies from paper to paper. No two research papers are in consensus as to which classification should be used. This present work, however, uses the input-output classification of banks based on Barnett's generalized model of production for financial intermediaries originally proposed in Barnett (1987) [1]. This model is based on economic theory definitions of inputs and outputs of a bank. Using this classification, the paper applies Data Envelopment Analysis to US banks during 2006-2016. This new methodology seeks to resolve and fix the issue of lack of consensus regarding which inputs and outputs to use for productivity analysis of banks. Furthermore, a standardized way of measuring productivity across banks is developed which can be used all over the world. This is accomplished by using the Malmquist Index of Productivity which is a tool used under Data Envelopment Analysis. The paper further establishes the connection of this tool with Barnett's generalized model of production for financial intermediaries. Results indicate very high efficiency levels for US banks even post financial crisis. The reason for this performance is the cleansing of the financial system as unhealthy banks either left the scene or were merged. Better risk management, cost management and efficiency of structure of funding are some other reasons for high efficiency.

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Section: F Hasanmentioning

confidence: 99%

A Nonparametric and Aggregation Theoretic Approach for Measuring Productivity of US Banks during 2006-2016

Hasan¹

2022

AJOR

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Efficiency and productivity of the US banking industry, 1998–2005: evidence from the Fourier cost function satisfying global regularity conditions

Feng

Serletis

2008

J of Applied Econometrics

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SUMMARYThis paper provides estimates of bank efficiency and productivity in the United States, over the period from 1998 to 2005, using (for the first time) the globally flexible Fourier cost functional form, as originally proposed by Gallant (1982), and estimated subject to global theoretical regularity conditions, using procedures suggested by Gallant and Golub (1984). We find that failure to incorporate monotonicity and curvature into the estimation results in mismeasured magnitudes of cost efficiency and misleading rankings of individual banks in terms of cost efficiency. We also find that the largest two subgroups (with assets greater than 1 billion in 1998 dollars) are less efficient than the other subgroups and that the largest four bank subgroups (with assets greater than $400 million) experienced significant productivity gains and the smallest eight subgroups experienced insignificant productivity gains or even productivity losses.

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How better monetary statistics could have signaled the financial crisis

Barnett

Chauvet

2011

Journal of Econometrics

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This paper explores the disconnect of Federal Reserve data from index number theory. A consequence could have been the decreased systemic-risk misperceptions that contributed to excess risk taking prior to the housing bust. We find that most recessions in the past 50 years were preceded by more contractionary monetary policy than indicated by simple-sum monetary data. Divisia monetary aggregate growth rates were generally lower than simple-sum aggregate growth rates in the period preceding the Great Moderation, and higher since the mid 1980s. Monetary policy was more contractionary than likely intended before the 2001 recession and more expansionary than likely intended during the subsequent recovery.

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Financial-Firm Production of Monetary Services: A Generalized Symmetric Barnett Variable-Profit-Function Approach

Cited by 6 publications

References 0 publications

A Nonparametric and Aggregation Theoretic Approach for Measuring Productivity of US Banks during 2006-2016

A Nonparametric and Aggregation Theoretic Approach for Measuring Productivity of US Banks during 2006-2016

Efficiency and productivity of the US banking industry, 1998–2005: evidence from the Fourier cost function satisfying global regularity conditions

How better monetary statistics could have signaled the financial crisis

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