From the Saving Glut to Financial Instability: Evidence from the Silicon Valley Bank Failure

Guillaume Vuillemey
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Guillaume Vuillemey: HEC Paris

No 1475, HEC Research Papers Series from HEC Paris

Abstract: I show that the saving glut spurs banking instability. In the US, banks locally exposed to its root causes -- higher savings by intangible-intensive firms and the rise in household wealth inequality -- massively increased deposits since 2000, leading to an unprecedented deposit-to-GDP ratio and to a surge in uninsured deposits. To causally identify an impact of this ``deposit glut'' on financial instability, I use the unexpected failure of Silicon Valley Bank in March 2023 as a quasi-natural experiment: other US banks with high local exposure to either intangible-intensive firms or wealth inequality experienced significantly larger drops in market valuation.

Keywords: Saving glut; Silicon Valley Bank; Deposits; Financial stability; Wealth inequality; Intangibles (search for similar items in EconPapers)
JEL-codes: E22 G21 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2023-04-18
New Economics Papers: this item is included in nep-fdg and nep-his
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1475

DOI: 10.2139/ssrn.4413287

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