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

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  • Vuillemey, Guillaume

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.

Suggested Citation

  • Vuillemey, Guillaume, 2023. "From the Saving Glut to Financial Instability: Evidence from the Silicon Valley Bank Failure," CEPR Discussion Papers 18107, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18107
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    More about this item

    Keywords

    Deposits; Global saving glut; Wealth inequality; Intangibles;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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