Working Paper: NBER ID: w31644
Authors: Damiano Sandri; Francesco Grigoli; Yuriy Gorodnichenko; Olivier Coibion
Abstract: Using a survey with information treatments conducted in the aftermath of SVB’s collapse, we study households’ perspectives on bank stability, the potential for panic-driven bank runs, and the role of public communication. When informed about SVB’s collapse, households become more likely to withdraw deposits, due to both a higher perceived risk of bank failure and higher expected losses on deposits in case of bank failure. Leveraging hypothetical questions and the exogenous variation in beliefs generated by the information treatments, we show that households reallocate deposit withdrawals primarily into other banks and cash, with little passthrough into spending. Information about FDIC insurance and communication about bank stability by the Federal Reserve can reassure depositors, while communication from political leaders only influences their electoral base.
Keywords: bank runs; public communication; households; bank stability; FDIC insurance
JEL Codes: E21; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Information regarding the collapse of SVB (G33) | Households' propensity to withdraw deposits (D14) |
| Information regarding the collapse of SVB (G33) | Households perceive their own banks as riskier (G21) |
| Information regarding the collapse of SVB (G33) | Belief that they are likely to recover a smaller fraction of their deposits if their bank fails (F65) |
| Communication from President Biden (L96) | Limited reach impacting primarily his electoral base (F69) |
| Information about FDIC insurance and communication from the Federal Reserve (G28) | Reassures depositors and counterbalances panic induced by SVB information treatment (E44) |
| Learning about the SVB collapse (G33) | Increases expected potential loss from holding deposits (E49) |