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Financial Liberalisation, Privatisation and Productivity in Banking: The Experience of Two Emerging Economies.

By Mohamed Shaban

Abstract

Banking systems in emerging and developing economies hold the key to economic growth and productivity change at the macroeconomic level. As financial globalization proceeds, many emerging economies are reforming their banking systems through the process of liberalisation, privatisation and deregulation, especially where state-owned banks have previously been dominant. This thesis uses both parametric and non-parametric methods, namely and Stochastic Frontier Analysis (SFA) and Data Envelopment Analysis (DEA) respectively, to measure the efficiency and productivity growth in the banking systems of two emerging economies – Turkey and Egypt. Coelli, Perelman and Romano (1999) approach is used for the banking sector for the first time in the literature. The pervasive gap is also addressed in the literature by empirically comparing the DEA and SFA efficiency scores following Bauer et al. (1998) conditions. A generalised parametric Malmquist approach is specified using the distance functions for both data sets. The findings show that Turkey and Egypt have various similarities. Both have undergone significant regulatory, ownership and market structure changes in the last two decades. The reform policies in both countries are stimulated by the IMF and World Bank. Egypt, as an emerging economy, has introduced a wide range of structural economic reforms to create a viable banking system in the past decade by adopting a cautious approach in liberalisation implementation. However, Turkey‘s approach was expeditious. Both banking sectors efficiency and productivity improved as response to the liberalisation policies. However, Turkey’s experience of financial crisis overwhelmed the obtained efficiency. The results on the separate economies suggest that scale effects can be important in identifying the initial impact of financial liberalisation policies on the productivity of banking sector

Publisher: University of Leicester
Year: 2008
OAI identifier: oai:lra.le.ac.uk:2381/4074

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