The Evaluation Of Technical Efficiency Of Banking Based On MCMC Method

Banking is not only the main body of Chinese financial system, but also part of the industrial system. Therefore the theoretical analysis and practical operation of the efficiency of the banking industry are an important guarantee to perfect competition system of commercial banks and improve the comprehensive competitiveness of commercial banks. The state-owned commercial banks are the main body of the Chinese banking industry in the past. Since the reform and opening up, the banking sector has undertaken the enormous costs due to the economic development and reform. Especially after the accession to the WTO, China's banking industry is facing the impact of foreign banks. It is of great importance and significance to improve banking sector efficiency for the Chineses economic development and financial security.this paper breifly reviews the current research of the efficiency of domestic banks in recent years, describes the relevant efficiency theory and mathematical base of the banking industry, and statistically explores the relevant analysis regarding bank efficiency during the period from 1998-2007 with the frontier efficiency method..Based on the dynamic stochastic frontier model, this paper uses the Markov chain Monte Carlo(MCMC) method based on the Gibbs sampling simulates the Markov chain, and make Bayesian estimation for the parameters of this model. The empirical model select the basic data about 11 Chinese banking financial institutions from 1998 to 2007, including China's four state-owned commercial banks, policy banks, joint-stock commercial banks, city commercial banks, rural commercial banks, rural cooperative banks, urban credit cooperatives, rural credit cooperatives and other banking financial institutions. Make the Bayesian estimation for the parameters of this model with the Markov chain Monte Carlo(MCMC), getting the evaluation result of technical efficiency in Chinese banking financial institutions. The result shows that the mean technical efficiency of Chinese banking financial institutions is up to 96.68%,and operating efficiency is higher, which indicates that the reforms in China's banking is effective. Through the analysis of the reasons of the success in the reform of bank system, this paper put forward political advice for the future development.