Abstract
The purpose of this study is to introduce a novel methodology to measure the central bank efficiency. The data envelopment analysis (DEA) applies in the combination of three input and two output variables characterizing the economic balance in international trade. Super-efficiency DEA model is applied for ranking & comparing the efficiency of different central banks. In contrast, the Malmquist productivity index (MPI) is used to measure the productivity change over the period of time. Further, the study is extended to quantify the impact of international trade dimension on the efficiency of the central bank by using Tobit regression analysis. Finally, based on our data analysis, we reported that the efficiency changes over the period of time and the total productivity changes significantly due to the technology shift as compared to efficiency change. Additionally, it is also observed that the central bank efficiency is impacted dramatically by the export level of the country as compared to import level, average exchange rate and GDP. It implies that the export level of the country significantly influences the performances of the central bank.
Highlights
International trade is the exchange of good, service and capital across the international territories
The central bank or central financial institution of a country can be considered as the engine of the economy, like an engine it has the power to control and regulate the economic and development functions, any malfunction in the engine creates a risk for the financial system of the country
This section analyses the central bank efficiency and results obtained by using the proposed data envelopment analysis (DEA) methodology. We use both radial and non-radial measures of efficiency to obtain pure technical, scale and super efficiency of top 17 Asia central banks listed in table 2 for 2016-18
Summary
International trade is the exchange of good, service and capital across the international territories (borders). The central bank plays a vital role in the economic system of the country by doing different functions, like currency regulation, securing the stability of exchange rate, supervisor of commercial and other financial institutions, controller of credit/money supply and balance on international trade. It is an only legal and autonomous financial institution that is allowed to print money as a legal tender [1], by printing money the central bank has opportunities to control the money supply, the total amount of funds available in the economy. The central bank of the country functions is dynamic because these are profoundly
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