The Integration of Baltic Banks into the EU Banking Market. Evidence from the Pre-crisis Period.

This research study analyses productivity changes between domestic and foreign banks in Baltic countries using a data envelopment analysis (DEA) model and the Malmquist Index with biased technology change during the period 2000-2006. The Malmquist index with biased technology has not previously been applied in transition economies and therefore the present research is innovative in this context. Our results show that Baltic banks, on average, have experienced positive productivity growth during the analysed period. Moreover, the productivity increasing is deconstructed into improvements in technical efficiency change and technological efficiency.