We model the impact of bank mergers on loan competition, reserve holdings and aggregate liquidity. A merger changes 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. …

We model the impact of bank mergers on loan competition, reserve holdings and aggregate liquidity. A merger creates an … internal money market that affects reserve holdings and induces financial cost advantages, but also withdraws liquidity from … liquidity. Mergers among large banks tend to increase aggregate liquidity needs and thus the liquidity provision in monetary …