Estimation of a cost function for Argentine private banks using panel data

Working papers (original series) | 1997 | N 3

Abstract

The banking cost estimates made for Argentina have been based on cross-sectional analysis. In this work, we attempt to estimate a cost function for Argentine private banks, using panel data. The main interest in performing the analysis with panel data is in order to capture unobservable heterogeneity, either between firms or over time, which is impossible to obtain with cross-sectional or time series studies separately. Private banks were considered in the period 1992-1994. In said period, the Argentine financial system observed a very important recovery in its level of activity, as a consequence of the remonetization of the economy, generated by the validity of the Convertibility Plan, and the rapid growth that it experienced. For the period analyzed, the results obtained showed increasing returns to scale and an important latent heterogeneity among the firms.

JEL classification: C33, D24