THE EFFICIENCY OF THE FEDERAL-RESERVE IN PROVIDING CHECK PROCESSING SERVICES

We examine the efficiency and productivity of check processing offices of the Federal Reserve System using a variety of frontier estimation techniques. Although there is broad agreement among the techniques about the relative efficiency rankings of offices, the average level of efficiency varies considerably depending on the technique chosen. Similar to other studies of financial services, we find that measured cost inefficiency (deviations from the frontier) dominates scale inefficiency. We find no evidence of significant technological progress over the main sample period.