The paper analyzes bank performance in the context of the integrated European Union market and its member countries. First, the paper investigates the technical efficiency of banks in each country sample using a Data Envelopment Analysis (DEA) model incorporating only banking variables. Then, a second DEA model is defined incorporating environmental factors together with banking variables in order to standardize the country-specific environmental conditions. Based on these models, the paper systematically analyzes the efficiency position for each of the European banking industry if average banks decide to operate in any other country. The results indicate that adverse (advantageous) environmental conditions are a positive (negative) factor for the home banking industry and being technically efficient appears to be a significant deterrence to foreign competition.

The fiscal theory of price determination suggests that if primary surpluses evolve independently of government debt, the equilibrium price level “jumps” to assure fiscal solvency. In this non-Ricardian regime, fiscal policy—not monetary policy—provides the nominal anchor. Alternatively, in a Ricardian regime, primary surpluses are expected to respond to debt in a way that assures fiscal solvency, and the price level is determined in conventional ways. This paper argues that Ricardian regimes are as theoretically plausible as non-Ricardian regimes, and provide a more plausible interpretation of certain aspects of the postwar U.S. data than do non-Ricardian regimes.

Meyer (1999) has suggested that episodes of heightened uncertainty about the NAIRU may warrant a nonlinear policy response to changes in the unemployment rate. This paper offers a theoretical justification for such a nonlinear policy rule, and provides some empirical evidence on the relative performance of linear and nonlinear rules when there is heightened uncertainty about the NAIRU.