Center for Computational Finance and Economic Systems (CoFES)

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Browsing Center for Computational Finance and Economic Systems (CoFES) by Subject "Banking"

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    Essays on Productivity Analysis
    (2012) Hao, Jiaqi; Sickles, Robin C.
    In Chapter One, to measure the efficiency changes in the U.S. banking industry after structural changes since the late 1970s, we utilize a set of panel data stochastic frontier models of varying parametric assumptions and function specifications. Our estimates support the opinion of improving efficiency in the banking industry in the period from 1984 to early 1990s. The first chapter raises two research questions. First, the comparison of different estimates shows that the choice of methodologies has significant impacts on the levels and dynamics of estimation results. How should we consider a more general approach to incorporate modeling uncertainty? Second, to fit in a broader picture, how can we extend our tools of estimating industry-level efficiencies to measure efficiency changes of countries and regions? These two questions motivated us to conduct researches which are in the second and third chapters. In Chapter Two, we propose the construction of a consensus estimate to extract information from all involved studies. Insights from different fields of economics supporting aggregating estimators are provided. We discuss three methodologies in detail: model averaging, combining forecast and rule-based methods using Meta-Regression Analysis. Two Monte Carlo experiments are conducted to examine the finite-sample performance of the combined estimators. In Chapter Three, we accommodate the models discussed in Chapter One to measure the Total Factor Productivity (TFP) changes. Discussions of various theories explaining economic growth and productivity measurements are provided. We decompose the change of TFP into technical efficiency change and innovational change. Estimations are also combined according to principles in Chapter Two. Two studies utilizing the World Productivity Database from the UNIDO are conducted. In the first study, we find out that from 1972 to 2000 the Asian region had the highest Total Factor Productivity growth, which was mainly contributed to innovation progress instead of efficiency catch-up. In the second study, we find out that between 1970 and 2000, Asia Four Tigers and new tiger countries (China, India, Indonesia, Malaysia, and Thailand) had substantial TFP advancements, mainly due to innovations. The other four groups of countries including developed and developing countries had downward trends in TFP growth.
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    Market power and efficiency
    (2010) Kutlu, Levent; Sickles, Robin
    In the first chapter, we examine the relation between efficiency and competition in a dynamic framework. For this purpose, we measure efficiencies and conduct of the U.S. airlines in two city-pairs. We model the conduct parameter as an unobservable state variable which is an AR(1) process and estimate it by the square-root Kalman filter technique. Our results accords with Hick's (1935) 'quiet life hypothesis.' In the second chapter, we propose using the Kalman filter estimator (KFE) to estimate the technical efficiency. We assume that the effects term is an AR(1) process or a random walk. We apply the KFE to estimate the average efficiencies of the U.S. airlines during the period 1971-1986. We found evidence of 'quiet life hypothesis.' In the third chapter, we estimate the time-varying efficiencies of the U.S. banks during 1984-1995 with four different efficiency estimators. Using these series of efficiency estimates, we make a multivariate Kalman filter analysis to examine the efficiency trend in the G.S. banks during this period. We observed that the regulations and innovations had a positive effect on the efficiency of G.S. banks as expected. However, this positive effect decayed through time. The fourth chapter generalizes the well-known Battese-Coelli (1992) (BC) estimator to allow endogenous regressors. The regressors are still assumed to be independent of the effects though they are correlated with the irregular term. The simulations show the superiority of our method to the BC estimator. Efficiency is a residual that is caused by managerial mistakes. In the final chapter, we propose some strategies to minimize such mistakes in the Stackelberg competition world with price discrimination. We suggest that the leader should use its preemptive advantage to attract the highest value customers and that the follower should price discriminate over the residual demand.