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Title:Bank mergers, competition and liquidity PDF Logo
Authors:Carletti, Elena
Hartmann, Philipp
Spagnolo, Giancarlo
Issue Date:2006
Series/Report no.:CFS Working Paper 2006/08
Abstract:We model the impact of bank mergers on loan competition, reserve holdings and aggregate liquidity. A merger changes the distribution of liquidity shocks and creates an internal money market, leading to financial cost efficiencies and more precise estimates of liquidity needs. The merged banks may increase their reserve holdings through an internalization effect or decrease them because of a diversification effect. The merger also affects loan market competition, which in turn modifies the distribution of bank sizes and aggregate liquidity needs. Mergers among large banks tend to increase aggregate liquidity needs and thus the public provision of liquidity through monetary operations of the central bank.
Subjects:Credit Market Competition
Bank Reserves
Internal Money Market
Banking System Liquidity
Monetary Operations
JEL:D43
G21
G28
L13
Persistent Identifier of the first edition:urn:nbn:de:hebis:30-25993
Document Type:Working Paper
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

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