Article Abstract:
The degree of financial development of an economy is inversely linked to the optimal level of reserve requirements. Utilization of a simple productive economy model where financial intermediaries are at work reveals that improvement in financial system efficiency results to a reduction in reserve requirements. Such finding explains why there is a growing trend among industrialized countries to lessen mandatory reserves. A relationship was also established between optimal reserve requirement and rising costs of state verification.
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Article Abstract:
The evidence of inefficiencies in the US banking system is analyzed and their temporal nature as well as activities undertaken in response to such are likewise discussed. A survey of a sample of big banks for the period 1981-1991 was used to validate assumptions. Results show that such inefficiencies continue over a long period of time. However, inefficient firms can likely survive in the long run by means of risk taking. Furthermore, constraints to exit may lead to the continued existence of inefficient firms.
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Article Abstract:
Scale economies, subadditivity and the inefficiency of US multinational banks (MNB) and domestic banks (DB) in plant and firm levels are compared. Results show that DBs and MNBs have different cost framework as evidenced by varying ray scale diseconomies. MNBs are also found to lord it over DBs at all sizes except at the smallest size level in subadditivity diseconomies. The cost structure of US banks indicate that their scale or size does does not affect their worldwide competitiveness.
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