Evaluating Cost-Efficiency of Iran's Banking Industry: 2001-2007

This paper tries to evaluate the cost-efficiency of Iran''s banking industry for the period 2001-2007. To meet this end، an output-oriented stochastic frontier Translog cost function was applied for two products، namely: loans and deposits. The study employs Battese-Coelli''s time varying cost inefficiency model to examine Iran''s banking efficiency. The data are collected from the financial statements of 10 state-owned and 4 private banks in Iran. Findings indicate that cost inefficiency increased from 0. 22 (in 2001) to 0. 37 (in 2007) during the period of the study. However، the results show that the private banks are more efficient than state -owned ones.