From the Saving Glut to Financial Instability
Résumé
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.