Cost efficiency of the banking industry and unilateral euroisation: A stochastic frontier approach in Serbia and Montenegro |
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| Institution: | 1. Department of Chemistry, Faculty of Science, University of Kragujevac, Radoja Domanovi?a 12, 34000 Kragujevac, Serbia;2. Institute of Chemistry, P. J. ?afárik University in Ko?ice, Moyzesova 11, SK-041 54 Ko?ice, Slovakia;1. Eastern Mediterranean University, Cyprus;2. Southern Illinois University Edwardsville, United States;1. Institute of Public Finance, Smi?iklasova 21, 10000 Zagreb, Croatia;2. Vienna Institute for International Economic Studies, Vienna, Austria;1. Banco de la República (Central Bank of Colombia), Colombia;2. Research and Development, Quantil, Colombia;1. University of Portsmouth, Department of Economics and Finance, Portsmouth Business School, Portland Street, Portsmouth, PO1 3DE, United Kingdom;2. Webster Vienna Private University, Department of Business and Management, Praterstrasse 23, 1020, Vienna, Austria;3. Johannes Kepler University, Department of Economics, Altenberger Strasse 69, 4040 Linz-Auhof, Austria;4. Department of Economics, Faculty of Economic and Management Sciences, University of Pretoria, 0002, South Africa;5. Center for Energy and Sustainable Development (CESD), Montpellier Business School, Montpellier, France |
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| Abstract: | This paper aims at investigating the differences in cost efficiency of the banking industry in Serbia and Montenegro over the period 2005–2012. These two countries operated under a common monetary regime until 1999 and followed two different monetary regimes thereafter: unilateral euroisation in Montenegro and monetary independence in Serbia. A stochastic frontier approach incorporating bank-specific and country-related variables is used to analyze cost efficiency in the banking sectors of Serbia and Montenegro. The analysis shows that a bank operating at given conditions in terms of ownership, market and other specific characteristics presents significantly higher cost efficiency if it operates in Montenegro rather than in Serbia. We argue that this result may relate to the choice of unilateral euroisation made by Montenegro. It is also shown that foreign-owned banks, higher capitalized banks and banks with lower non-performing loans operate at higher cost efficiency. |
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| Keywords: | Banking Cost efficiency Dollarization Euroisation Montenegro Serbia |
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