Geography of finance

The geography of finance (or financial geography) 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, as well as the global and local connectivity of financial flows and networks. It also researches the creation of new financial centres around the world, both offshore and onshore.^[1]

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 explaining spatial differences.^[3] In the 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 the geography of networks.^[8] Furthermore, researchers analyse how and how strongly the current spatial distribution of finance affects the allocation of funds, capital, and credit across different regions.^[9]

The relevance of economic geography is already quite established in the academic world, and research on the topic is in full progress.^[10] However, the 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]

Geography of finance focuses on the place where financial activities occur and the cause. It researches the location of banks, stock markets, and financial firms and their impacts on local and global economy. Geography of finance is the alternative approach to financial economics offering an alternative perspective to the traditional view which primarily examines the overall market trends and prices ^[13][14].

Financialization entails that finance (in the form of loans, investments and profit-making strategies) is increasingly playing a greater role in daily economic life. Using this, many regions develop differently. As an illustration, researchers like French et al.,^[15] has pointed out that the prevalence of financial thinking can influence the areas that will get more investments and those that will not. The major world financial hubs like London, New York, and Hong Kong command huge funds and control of the investment directions ^[13][14]. Also, special financial zones and offshore destinations also contribute to the free movement of money across the borders but this can bring about inequality since all regions do not have equal access to credit and investment ^[15]

Geography of finance is also being altered by technology. Alibaba, through its partner Ant Group, is an example of a site that bridges the gap between online shopping and digital payments, lending, and credit. This diminishes the role of physical distance in finance and has contributed to growth of the cities such as Hangzhou to be new financial centres. Digital platforms of this nature demonstrate how technology can transform the world flows of money and minimize financial exclusion in certain locations, but nonetheless, regional variations are observed ^[15].

So, in general, the geography of finance assists us to comprehend the impacts of finance upon local economies, regional development, and the worldwide economy system itself through paying attention to the places where financial practices occur and the connections between places ^[13][14][15].

The September 11 attacks that targeted the World Trade Centre in New York City drew new attention to the geography of finance. Even though cities have more often been damaged by natural disasters or terrorist attacks, this attack was focused on the financial system and proved to have significant effects. The event led to a rethinking of the global geographical organization of the financial services industry and drew academic attention to the importance of such densely organized financial districts.^[16]

The 2008 financial crisis also led to interesting developments in the geography of finance. It drew new attention to the field, as the crisis showed that local events could cause a financial crisis that affected small businesses and local governments around the world.^[17] The relocation of financial services that had already been occurring was amplified by this crisis, decreasing the importance of major financial centers like Wall Street in lieu of relatively new financial centers elsewhere around the world.^[18]

• International Finance
• International Trade
• Location Theory