We isolate the direct bank-to-sovereign distress channel within the Eurozone’s sovereignbank-loop by exploiting the global, non-Eurozone related variation in stock prices. We instrument banking sector stock returns in the Eurozone with exposure-weighted stock market returns from non-Eurozone...

Do information frictions have a causal impact on the international flow of financial capital? Using the international rollout of telegraph cables in the 19th century, I show causal evidence that reductions in information frictions had a significant and positive impact on the bilateral...