Important questions concerning the structure and operation of a European central bank remain to be answered. Although there exists no precedent for the process of institution-building in which the European Community is currently engaged, the founding and early operation of the Federal Reserve...

Using hand-collected data spanning more than a decade on European banks’ sovereign debt portfolios, we show that the trust of residents of a bank’s countries of operation in the residents of a potential target country of investment has a positive, statistically significant, and economically...