Efficiency Determinants and Dynamic Efficiency Changes in Latin American Banking Industries

This paper investigates the dynamic and the determinants of banking industry efficiency in Latin America. Allocative, technical, pure technical and scale efficiencies are calculated and analyzed in each country. We find that Latin American bank managers have been using resources efficiently, but they are not choosing an optimal input/output. Additionally, we find that traditional banking performance measures are positively correlated with efficiencies while variables that measure banking and financial structure development and macroeconomics present mixed results.