Geography of finance
Geography of finance is a branch of economic geography that focuses on issues of financial globalization and the geographic patterns of finance. It studies the effects of state sovereignty, culture and different kinds of barriers that affect the spatial distribution of finance, such as uneven development and financial exclusion, and the global and local connectivity of financial flows and networks. Finally it also researches the creation of new financial centres around the world, both offshore and onshore.[1]
Geography matters
With the continuing process of globalization, some geographic barriers such as transportation costs of goods and capital are steadily decreasing.[2] However, many other kinds of geographic distance are still very present and relevant to explain spatial differences.[3] In geography of finance, researchers analyse the effects of this distance on the distribution of the financial system across the world. Fields of research include culture and education,[4] technology,[5] the effects of tacit knowledge and relational proximity [1] and politics.[6] An interesting issue in the latter is the increasing entanglement of banks and nations,[7] which is closely related to geography of networks.[8] Furthermore, researcher analyse how and how strongly that current spatial distribution of finance affects the allocation of funds, capital and credit across different regions.[9]
Finance matters
The relevance of economic geography is already quite established in the academic world and research on the topic is in full progress.[10] However, geography of finance is now gaining individual focus, especially as the link between the financial economy and the real economy is losing strength.[11] This is emphasized by the existence of economic bubbles, and the fact that the value of financial transactions is often multiple times larger than the real economy[12]
Recent developments
The September 11 attacks that targeted the World Trade Centre buildings in New York have drawn new attention to geography of finance. Even though cities have more often been damaged by natural disasters or terrorist attacks, this attack was so focused on the financial system and proved to have big effects on it. Therefore, the event caused people to rethink about the geographical organization of the financial services industry around the world, and academic attention on the importance of such densely organized financial districts[13] The financial crisis of 2007-2008 also caused interesting developments for the research in geography of finance. First of all it drew new attention to the field, as the crisis showed that local events could cause such a global financial crisis that affected even very small companies and (local) governments around the world[14] Secondly, the relocation of financial services that was already going on was amplified by this crisis, decreasing the importance of for example Wall Street to relatively new financial centres on the world [15]
See also
References
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