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

Guillaume Vuillemey

No 18107, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: I show that saving gluts spur financial instability. In the US, banks locally exposed to its root causes -- the rise in household wealth inequality and higher savings by intangible-intensive firms -- massively increased deposits since 2000, leading to an unprecedented deposit-to-GDP ratio and to a large increase in uninsured deposits. To causally identify an impact of the saving glut on financial instability, I rely on the unexpected failure of Silicon Valley Bank in March 2023: other US banks with higher local exposure to either wealth inequality or intangible-intensive firms experienced significantly larger drops in stock prices.

Keywords: Deposits; Global saving glut; Wealth inequality; Intangibles (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2023-04
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