Abstract
Virtually all studies of bank cost efficiency have used stock measures of banking output. The effects on time-series estimates of total factor productivity and cross-sectional estimates of scale economies are contrasted using both stock (value of deposit and loan balances) and flow (number of deposit and loan transactions) measures. While productivity growth differs between these two output measures over the last 20 years, it is similar over the last decade, but in all cases is quite low. For scale economies, slightly U-shaped average costs are found, with the output stock measure giving the better fit.
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This research was performed while the author was at the Federal Reserve Bank of Richmond; the opinions expressed do not necessarily reflect those of the Board of Governors, the Reserve Banks, or their staffs. Comments by Allen Berger, Diana Hancock, and two anonymous referees have improved the article. Research assistance by Alex Wolman has been outstanding.
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Humphrey, D.B. Flow versus stock indicators of banking output: Effects on productivity and scale economy measurement. J Finan Serv Res 6, 115–135 (1992). https://doi.org/10.1007/BF01046626
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DOI: https://doi.org/10.1007/BF01046626