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From the Saving Glut to Financial Instability

Author

Listed:
  • Guillaume Vuillemey

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

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.

Suggested Citation

  • Guillaume Vuillemey, 2023. "From the Saving Glut to Financial Instability," Working Papers hal-04414073, HAL.
    • Handle: RePEc:hal:wpaper:hal-04414073
    DOI: 10.2139/ssrn.4413287
    as

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