How Can Bank Reforms Assuage Socioeconomic Ordeals in Emerging Economies?: Lessons for Egypt from the Turkish Experience

Abstract

This research utilises a three-stage Stochastic Frontier Analysis/Data Envelope Analysis to investigate the relationship between post-crisis banking reforms, bank efficiency and macroeconomic performance from 2000 till 2010. The study draws lessons for Egypt from the Turkish bank reforms which successfully addressed the popular economic aspirations of growth, employment and stable prices. Whilst Turkey ensured that economic and banking reforms trickle down to all income groups, soaring food prices and high youth unemployment exasperated living conditions in Egypt, which helped trigger the Revolution of January 2011. The contribution of this study is to measure bank efficiency in accomplishing popular macroeconomic aims, instead of fulfilling the bank-centric goals of enhancing bank profitability and cost efficiency. The results reveal that the average-sized banks and domestic private banks display highest efficiency. Public debt, inflation and concentrated markets have unfavourable influences on bank efficiency. JEL Classifications: E240; G210; G280