Mean Variance Optimization of Non-Linear Systems and Worst-case Analysis
AbstractWe 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.
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Bibliographic InfoPaper provided by Center for Financial Studies in its series CFS Working Paper Series with number 2006/08.
Length: 49 pages
Date of creation: 06 Mar 2006
Date of revision:
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Credit Market Competition; Bank Reserves; Internal Money Market; Banking System Liquidity; Monetary Operations;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-11 (All new papers)
- NEP-CBA-2006-09-11 (Central Banking)
- NEP-COM-2006-09-11 (Industrial Competition)
- NEP-FIN-2006-09-11 (Finance)
- NEP-FMK-2006-09-11 (Financial Markets)
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