Propagation of the Opioid Epidemic through the Banking Network

We study the spillover effects of the opioid epidemic through the banking network. Using granular opioid supply data, we first document a negative link between local opioid supply and deposit growth at both the county and bank levels. Facing deposit drains, exposed banks reduce lending activities, including mortgage origination and approval, in distant regions connected to the epidemic areas through banking networks. We conclude that the negative effects of a local healthcare crisis extend beyond the geographic boundaries to faraway areas and that prior estimates, focusing on the local effects, underestimate the real economic consequences of the opioid epidemic