The Effect of Macroeconomic Stability State on Efficiency in the Banking Industry (MENA Countries)

Banking system is one of the important sections in the economy. In economies those stock exchange and other financial intermediaries are inefficient this rule is vital. In this regard the efficiency of banking system should be mentioned in the economy.This paper examines empirically the effect of macroeconomic stability on efficiency in the Middle East and North Africa (MENA) banking industry for the years 1995 to 2008 by Using panel data method. We use bank level data to study the efficiency of banks in MENA countries and provide possible explanations for the difference in the efficiency levels of banks. We find that banks, on average, could save 20 percent of their total costs if they were operating efficiency. Through the stochastic frontier approach (SFA) method we measure the cost efficiency of different banks in MENA including Iranian banks. Then we investigate the impacts of macroeconomic State on the efficiency level of banking industry. In this study are as inflation rate and GDP per capita. The findings show that, the stability macroeconomic stability has increased efficiency during the period of study.