Central and Eastern European countries

We employ the directional technology distance function and present estimates of bank efficiency and productivity change in ten Central and Eastern European countries for the period 1998-2003. Our method allows the aggregation of individual bank inefficiency and productivity growth to the industry level and enables us to investigate potential differences in productivity across countries and across banks with different ownership status. Our findings suggest that productivity for the whole region declined in the first years, but improved afterwards, especially over the last years, while there are diverging trends in productivity growth across banking industries. Moreover, foreign banks outperform domestic private banks both in terms of efficiency and productivity