First Quarter 1992
Federal Reserve Bank of Dallas

Economic Review was published until 1999.

The Comparative Growth Performance of the U.S. Economy in the Postwar Period
Mark A. Wynne

Productivity growth is the single most important determinant of improvements in a country's living standards over time. Accordingly, the U.S. productivity slowdown of the past two decades has caused great concern and sparked much debate.

In this article, Mark A. Wynne argues that the problems associated with the U.S. slowdown may be overstated. Wynne shows that the rates of productivity growth experienced in the immediate postwar period were extraordinary in comparison with historical standards. Thus, some slowdown was probably unavoidable. U.S. productivity performance in comparison with that of other countries, especially Japan's, is also perceived as poor. But this perception may be flawed, Wynne suggests, because higher growth rates abroad reflected convergence of foreign productivity to U.S. levels.

Free Trade Agreements and the Credibility of Trade Reforms
David M. Gould

David M. Gould argues that free trade agreements can help developing countries establish the credibility essential to successful trade reform. Credibility, he explains, is necessary if trade reform policies are to entice investment into the economic sectors where the liberalizing country has its greatest comparative advantage. As Gould explains, a free trade agreement enhances the credibility of trade reform policies by providing evidence of a government's long-term commitment to free trade and by discouraging protectionist policies in foreign markets. Gould concludes with an outlook for U.S.-Mexican free trade.

Quantifying Management's Role in Bank Survival
Thomas F. Siems

Analysts often regard the quality of bank management as the most important factor in determining whether a bank fails or survives. Applying data envelopment analysis to multiple bank inputs and outputs, Thomas F. Siems presents a new model that quantitatively assesses bank management quality. This new paradigm considers a bank's essential financial intermediation functions (that is, attracting deposits to make loans and investments) to compute a scalar measure of efficiency.

Siems' analysis confirms that management's role is important to a bank's survival. Management quality scores for surviving institutions are significantly better than those for failed banks-up to two and one-half years before failure. Banks whose managers poorly allocate resources and disregard the needs of their customers and markets have a greater chance of failing.