XT1I

SERIES CORRELATED WITH OPERATING EXPENSES

I. INTRODUCTION

THE total expenses of member banks by Federal Reserve districts
 received attention in Chapters VI, IX, X, and XI. In
Chapter VI, the norms and trends of the district ratios, without
reference to other types of data, were traced out in detail. In
Chapter IX, it was found that both the directions and percentage
amounts of deviation and of change in ratios of total expense
were positively correlated with the respective corresponding deviations
 and changes in ratios of loans and discounts to earning
assets. Moreover, the conclusion was reached in Chapter X that
total expenses, expressed in terms of earning assets and of gross
earnings, were positively and negatively correlated with deposits
variously measured, the items correlated being percentage differences
 from district and country averages and percentage
changes from year to year. These several correlations are summarized
 in Table 130. Again, as shown in Chapter XI, ratios
of total expense to earning assets are positively correlated with
ratios of gross earnings to earning assets, the bases of correlations
 being the same as those just mentioned.
In these correlation studies, ratios of total expense are the
dependent variables. That is, what is observed are the net
amounts of dispersion, by sign and by direction, in ratios of such
expense, variously measured, associated with other series of data,
the latter, in each case, being the independent variable. These
several analyses show how ratios of total expense are associated
with variable ratios and changes in other series. They do not,
however, show the manner in which percentage deviations and
year-to-year changes in the ratios in each of these series are associated
 with similar deviations and changes in the ratios of total
expense. It is considerations of this nature with which this chapter
 is concerned.

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