Competitiveness and Efficiency of the Banking Sector and Economic Growth in Egypt

Abstract

Abstract: This paper investigates the impact of financial reforms on competitiveness and production efficiency of the banking sector, as well as the short-term and long-term impact on economic growth, in Egypt during 1992–2007. The results suggest that the reforms have a positive and significant effect on competitiveness and production efficiency. Also, the evidence shows that state-owned banks are generally less competitive than private banks and foreign banks are less competitive than domestic banks. The average x-inefficiency of Egyptian banks is around 30 per cent, which is comparable to those reported for other African countries. Finally, there is evidence to suggest a significant relationship between financial bank productive efficiency and economic growth in the short run but not in the long run. Overall, the results support the argument for continuing the financial sector reform programme in Egypt.