We study the differential impact of exchange rate volatility on cost efficiency and market structure when banks have non-trivial exposures to foreign currency operations. We use unique pre-war data on quarterly revaluations of assets and liabilities denominated in foreign currencies that Russian...

We study the differential impact of exchange rate volatility on cost efficiency and market structure when banks have non-trivial exposures to foreign currency operations. First, we document that cost efficiency estimates are both severely downward biased by 30% on average and generally not rank...