Bank Efficiency and the Effectiveness of Monetary Policy

Contemporary Economic Policy, Vol. 26, Issue 4, pp. 579-589, October 2008

11 Pages Posted: 16 Oct 2008

See all articles by Michael R. Jonas

Michael R. Jonas

University of San Francisco - Department of Economics

Sharmila King

University of the Pacific (UOP) - Department of Economics

Abstract

Advances in information technology and bank consolidation have altered the way banks operate by necessitating that banks control costs and provide services efficiently to remain competitive. Given the unique role bank operations play in the transmission of monetary policy, a key unresolved question is whether bank efficiency alters monetary policy outcomes. Using a stochastic frontier approach to measure cost-efficiency and panel data of U.S. bank balance sheets, we show that banks with greater cost-efficiency are more sensitive to monetary shocks.

JEL Classification: E52, E44, E51

Suggested Citation

Jonas, Michael R. and King, Sharmila, Bank Efficiency and the Effectiveness of Monetary Policy. Contemporary Economic Policy, Vol. 26, Issue 4, pp. 579-589, October 2008, Available at SSRN: https://ssrn.com/abstract=1281100 or http://dx.doi.org/10.1111/j.1465-7287.2008.00102.x

Michael R. Jonas (Contact Author)

University of San Francisco - Department of Economics ( email )

2130 Fulton Street
San Francisco, CA 94117-1080
United States

Sharmila King

University of the Pacific (UOP) - Department of Economics ( email )

Stockton, CA 95211
United States

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