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Measurement of Output, Scale Economies and Productivity in Banks: A Methodological Note

  • Economics


A large number of monetary/credit policy issues are critically linked to the extent to which banks are subject to increasing or decreasing economies of scale. Actual verification of this is, however, full of problems arising from disagreement concerning appropriate classification of outputs and inputs for a banking firm. The main thrust of this paper is to show that a new approach to the theory of a banking firm can be meaningfully formulated by explicitly treating both loans and deposits as outputs.

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