European depositors’ behavior and crisis sentiment

Employing monthly search volume data on crisis-related queries from the Google Trends database, we introduce two modified Google search-based crisis sentiment indicators as measures of depositors’ fear. These indices capture depositors’ crisis sentiment, and they are found to be significant drivers of bank deposits flows across European Union countries. Our findings indicate that countries for which the search intensity of crisis-related keywords is high, they tend to witness bank deposit outflows. By employing a Panel Vector Autoregressive approach, we document the robustness of our findings. Our findings suggest that policy makers should incorporate depositors’ fear in their macroprudential policies as predictor of bank insolvency.