This paper investigates the cost and revenue efficiency of Turkish commercial banks in the deregulated period 1989-1999 using a three input-three output Fourier-flexible functional form. The results suggest that the Turkish banking system has a serious inefficiency problem. A ranking of banks under each model shows that there is a statistically significant negative correlation between the estimates of cost and revenue efficiency. Although the annual cost inefficiency average decreased over the period between 1995 and 1998, commercial banks in the sector operated more inefficiently than their U.S. and European counterparts during the sample period. The results also indicete the existence of technological progress between 1996 and 1999.

This paper investigates the cost and revenue efficiency of Turkish commercial banks in the deregulated period 1989-1999 using a three input-three output Fourier-flexible functional form. The results suggest that the Turkish banking system has a serious inefficiency problem. A ranking of banks under each model shows that there is a statistically significant negative correlation between the estimates of cost and revenue efficiency. Although the annual cost inefficiency average decreased over the period between 1995 and 1998, commercial banks in the sector operated more inefficiently than their U.S. and European counterparts during the sample period. The results also indicete the existence of technological progress between 1996 and 1999.