From the Saving Glut to Financial Instability

Guillaume Vuillemey
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Guillaume Vuillemey: HEC Paris - Ecole des Hautes Etudes Commerciales

Working Papers from HAL

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)
Date: 2023-10-17
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-04414073

DOI: 10.2139/ssrn.4413287

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