Productivity Growth and Efficiency in Indian Banking: A Comparison of Public, Private, and Foreign Banks

India's public sector banks (PSBs) are compared unfavorably with their private sector counterparts, domestic and foreign. This comparison rests, for the most part, on financial measures of performance, and such a comparison provides much of the rationale for privatization of PSBs.In this paper, we attempt a comparison between PSBs and their private sector counterparts based on measures of productivity that use quantities of outputs and inputs. We employ two measures of productivity: Tornqvist and Malmquist total factor productivity growth. We attempt these comparisons over the period 1992-2000, comparing PSBs with both domestic private and foreign banks. Out of a total of four comparisons we have made, there are no differences in three cases, PSBs do better in two, and foreign banks in one. To put it differently, PSBs are seen to be at a disadvantage in only one out of six comparisons. It is difficult, therefore, to sustain the proposition that efficiency and productivity have been lower in public sector banks relative to their peers in the private sector.

Inflation Targeting and Output Growth: Evidence from Aggregate European Data

This paper evaluates inflation targeting and assesses its merits by comparing alternative targets in a macroeconomic model. We use European aggregate data to evaluate the performance of alternative policy rules under alternative inflation targets in terms of output losses. We employ two major alternative policy rules, forward-looking and spontaneous adjustment, and three alternative inflation targets, zero percent, two percent, and four percent inflation rates. The simulation findings suggest that forward-looking rules contributed to macroeconomic stability and increase monetary policy credibility. The superiority of a positive inflation target, in terms of output losses, emerges for the aggregate data. The same methodology, when applied to individual countries, however, suggests that country-specific flexible inflation targeting can improve employment prospects in Europe.