Banking deregulation and allocative efficiency in Pakistan

Ahmad, Shabbir and Burki, Abid A. (2015) Banking deregulation and allocative efficiency in Pakistan. Applied Economics, 48 13: 1182-1196. doi:10.1080/00036846.2015.1096001

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Author Ahmad, Shabbir
Burki, Abid A.
Title Banking deregulation and allocative efficiency in Pakistan
Journal name Applied Economics   Check publisher's open access policy
ISSN 0003-6846
Publication date 2015-10-09
Sub-type Article (original research)
DOI 10.1080/00036846.2015.1096001
Volume 48
Issue 13
Start page 1182
End page 1196
Total pages 16
Place of publication Abingdon, Oxon, United Kingdom
Publisher Routledge
Collection year 2016
Language eng
Formatted abstract
This article examines the impact of deregulation policies on allocative efficiency of banks in Pakistan. It investigates whether deregulation has impacted the pattern of allocative efficiency of banks and explores which bank ownership segment has been more responsive. It uses data from 1991 to 2005 and explicitly models allocative inefficiency by using the translog shadow costshare system. Empirical results show that overregulation and imperfect market structure hampers the ability of banks to make competitive decisions. We find evidence of allocative inefficiency leading to over-utilization of labour and deposits vis-à vis operating cost. Empirical results for time-varying allocative efficiency show declining levels of allocative inefficiency for state-owned and private banks in post-reform period. Deregulation policies induce state-owned banks to decrease over-utilization of labour relative to deposits and operating cost while private banks succeed in using operating cost closer to optimal levels. Hence, policymakers have latitude to introduce more reforms without jeopardizing allocative efficiency
Keyword Banking regulation
Allocative efficiency
Shadow prices
Tanslog cost function
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2016 Collection
UQ Business School Publications
School of Economics Publications
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Created: Wed, 04 Nov 2015, 13:55:11 EST by Shabbir Ahmad on behalf of School of Economics