Cost-efficiency under inter-temporal dependence

Abstract

One method for evaluating cost-efficiency of commercial firms is data envelopment analysis. In the real world, data have a time dependency that also affects the cost-efficiency calculation. This article introduces a new model for measuring cost-efficiency under inter-temporal dependency in an assessment window. In the proposed approach, there is a reserve capital for the assessment window that is considered as the input of this period, and at any time of the window, a certain amount of capital is used. For practical application, the proposed model is applied to a real dataset of branches of an Iranian commercial bank to evaluate cost-efficiency under inter-temporal dependency.