Financial Geography Research Articles

Financial geography III: The financialization of the city

This report discusses the financialization of urban governance and the built environment as an explicit state strategy, focusing on municipal finance and the use of financial products by the local state and (semi-)public sector. A number of lessons can be drawn regarding the temporality and spatiality of financializing ‘the urban’. Firstly, the financial crisis that started in 2007 has not resulted in a definancialization of the city. Secondly, despite a number of common trends, the literature also highlights the diversity of experiences. Yet it would be too easy to conclude that the financialization of the land, housing and real estate is exclusively a Global North phenomenon, as it extends into the Global South. Finally, the literature notes an emerging gentrification-touristification-financialization nexus. The role of the state in all of this is variegated and often ambiguous.

Towards a mega-regional economy: A financial geography perspective to understanding Shanghai’s role in the Yangtze River Delta integration

Along with the ongoing processes of urbanisation and financialisation, as well as the formation of the spaces of flows in the age of digitalisation, we have witnessed the increase of a new type of spatial form—the mega-region in the world economy. In this paper, we investigate the role of Shanghai in the Yangtze River Delta (YRD) from a financial geography perspective. Built on the theoretical basis of mega-region and financial centres, this research highlights the significance of the Shanghai Stock Exchange and securities firms as critical financial intermediaries and economic actors, which contribute to the growth of YRD as a mega-regional economy and simultaneously enhance Shanghai’s status at a multi-scalar financial network. In conclusion, we also indicate that the heterogeneity of financial geographies should be foregrounded in a future study, and there is no one-size-fits-all model to understand the formation of a mega-region.

The Dynamics and Governmental Policies of Shanghai’s International Financial Center Formation: A Financial Geography Perspective

This article first provides a conceptual and theoretical analysis of international financial centers (IFCs) by focusing on IFCs’ main characteristics, categories, and policy regimes. It then reviews the policy initiatives driving Shanghai’s IFC, coming from the central and local governments, and evaluates their strategic effects. Finally, I emphasize the disadvantages of Shanghai’s IFC dynamics by focusing on the level of internationalization, the financial hinterland, the English professionals, and the legal system. The empirical study reveals that the construction of Shanghai’s IFC has achieved great advances, motivated by its policy dynamics since 1990, but its global impact is still limited compared to New York and London. This study sheds light on the dynamics of Shanghai’s IFC as a government-led model.

Impact of spatial concentration of the Russian banking sector on lending to regions and small and medium businesses

The article considers how the spatial concentration of the banking sector in Russia, associated with the formation of an increasingly centralized and state-owned banking system, affects lending in the regions of the country. Foreign research in the field of financial geography indicates that spatial centralization of the banking system may hinder sufficient lending to regions remote from financial centers, as well as small and medium-sized businesses, especially in times of crisis. We analyze these conclusions in relation to Russia in 2010—2017. Centralization of the Russian banking system is largely predetermined by the centralization of the economy as a whole and contributes to the redistribution of credit resources from the capital to the regions of the country, but adequate lending to SMEs is a problem in this situation.

Economic globalization, global financial crisis and China: A financial geography perspective

Economic globalization, global financial crisis and China: A financial geography perspective

Financial geography II: Financial geographies of housing and real estate

Geographers have started studying residential (housing) and commercial real estate (offices, retail, leisure) at the intersection of financial and urban geographies to understand how the built environment – chunky and spatially fixed – has been turned into a (quasi-)financial asset – ‘unitized’ and liquid – through a range of regulatory and socio-technical changes and constructions. The financialization of real estate is not limited to the rise in household debt, mortgage securitization and international investment in office markets, but increasingly also affects rental housing: private equity, hedge funds and REITs buy up large portfolios of social and private rented housing, while housing associations use derivatives and other financial instruments. This report surveys the most recent research on finance, real estate and housing.

Neoliberal Europeanisation, Variegated Financialisation: Common but Divergent Economic Trajectories in the Netherlands, United Kingdom and Germany

AbstractRevisiting attempts to connect comparative political economy and the geographies of finance, we present a balance sheet analysis of financialisation in the UK, the Netherlands, and Germany from 1992–2012. We define financialisation broadly as a trend towards a greater reliance on assets and/or debt, with particular manifestations across different domains of the economy: a greater reliance on financial tools and metrics for the state and non‐financial corporations, a shift to market‐based banking and increasing dependence on credit or asset‐based welfare for households. We use OECD time‐series balance sheet data and qualitative accounts drawn from the literature to overview economic change in our case countries. Using this informal comparison we develop the concept of ‘variegated financialisation’ by exploring the common but not convergent financialising trajectories of our case countries and relating them to the politics of finance’s institutional embedding.

Financial Geography: The Local Effects of Monetary Policy

This paper aims to survey the existing literature on the relationship between banking and space. Many studies have documented disparities in the regional responses to monetary policy shocks. Given the fact that monetary policy affects some regions of the country more than others, a review of the large stance of empirical studies examining how monetary policy may affect regions differently and why, reveal that certain regions of the country are consistently more affected by monetary policy than others due to the fact that those regions have a relatively high share of their economy in interest sensitive industries, which is more susceptible to negative monetary policy shocks.

Placing the state within geofinance

In this commentary, I examine how research into global financial networks can be used to develop understandings of how place and space shape global finance. Drawing on the growing regulatory interest in geofinance, I argue that such a task presents considerable opportunities for financial geography in two main areas: first, in terms of diversifying our sources of empirics and theory to include those beyond the Global North; and second, in developing flatter ontologies of global finance that document how practices at the scale of financial centers and offshore jurisdictions shape relations of power and authority within global finance.

Review and Prospect of Financial Geography Research

As an important branch of economic geography, financial geography has important significance for maintaining the stable operation of the financial industry and thus promoting social and economic development. Based on the perspective of geography, we first combed the development history and main research fields of international financial geography. According to the differences of mainstream research methods in a specific period, the development process can be divided into three stages: germination, political economics and economic geography. With the help of literature measurement analysis, the international financial geography research is divided into the classic research field focusing on the financial center, the spatial evolution of financial subjects, the financial network and regional interaction, and the emerging research fields with different scales of financialization. Then it summarizes the progress of China’s financial geography research. Although China’s financial geography started late, there is still a gap between the breadth and depth of research compared to foreign countries, but its institutional background is different from the Western institutional background. It provides a diversified explanation for its own specific financial landscape. Finally, combined with the development status of financial geography at home and abroad, the research prospects of this discipline are prospected.

Liability-driven investment and pension fund exposure to emerging markets: A Minskyan analysis

This paper explores the determinants and implications of the growing allocation of insurance companies and pension funds to emerging markets. The key contention put forward is that liabilities are at the core of the portfolio choice of insurance companies and pension funds, and that this has important consequences for the stability of asset demand. The paper supports this contention with a theoretical framework based on Hyman Minsky and the results from 22 semi-structured interviews with European insurance companies and pension funds’ executives, investment consultants, and asset managers. It shows that the rising insurance companies and pension funds’ demand for emerging markets’ assets has to be analysed in the context of the pressures resulting from structural funding deficits and low yields. Emerging markets’ assets are sought as part of the sector’s strategy to increase returns and, given their subordinate integration into a spatially uneven international monetary and financial system, remain not suited to directly meet insurance companies and pension funds’ liabilities. This causes insurance companies and pension funds’ demand for these assets to be volatile and independent of conditions in these countries, reproducing emerging markets’ monetary and financial subordination. By stressing the structural financial (in)stability implications insurance companies and pension funds’ liabilities have for emerging markets’ asset demand, the paper contributes to the literature on insurance companies and pension funds’ investments in emerging markets and bridges the gap between those which have noted the importance of liability conditions for insurance companies and pension funds and the literature pointing to the destabilising impact of insurance companies and pension funds due to behavioural and agency issues. Moreover, by basing itself on a Minskyan theoretical framework, it responds to recent calls for a more systematic incorporation of heterodox economic thought into financial geography.

(Re-)writing markets: Law and contested payment geographies

While many emphasize the supposed frictionlessness and instantaneity of global financial flows, economic geographers have done important work placing globalization in concrete practices and spaces. Yet, cross-border payment transactions, which are constitutive of transnational markets, remain understudied. In this paper, I use creditor litigation against Argentina as a lens through which to explore material geographies of transnational financial payments. This litigation sheds light on the fundamental role of law (especially US common law) in structuring most major payment transactions today. Payment “flows” are not continuous at all, but rather legally divided into discrete spatial segments—and remapping these divisions, via litigation, has become a focal point of struggle between creditors and debtors, as well as among financiers. Fierce debates over contracts and their interpretation have been central in these battles. Furthermore, these financial geographies remain inextricably entangled not only with business actors, but with legal and political actors as well—law anchors economic geographies in state spaces and (often contradictory) state interests at a variety of scales.

How Chinese Financial Centers Integrate into Global Financial Center Networks: An Empirical Study Based on Overseas Expansion of Chinese Financial Service Firms

The increasing globalization of the Chinese economy has been enabled by both Chinese financial institutions operating globally as well as international firms operating within China. In geographical terms, this has been organized through a number of strategic cities serving as gateways for the exchange of financial functions, products and practices between China and the global economy. Drawing on location data of financial service firms in China listed on stock exchanges in Shenzhen, Shanghai and Hong Kong, this paper shows that Chinese financial firms are expanding globally and how Chinese financial centers are positioned and connected in the urban networks shaped by these financial service firms. It is found that Hong Kong, China, holds strategic positions in the integration of Chinese cities into global financial center networks, and that establishing a foothold in global financial centers such as New York and London has been a priority for Chinese financial institutions. The increasing capital flows directed by Chinese financial institutions suggests a shifting global financial geography, with numerous Chinese cities playing increasingly important roles within global financial center networks.

Speaking in riddles: The Panama Papers and the global financial services sector

In 2007, on the cusp of the economic crisis, a paper was published in Growth and Change (June 2007) entitled “Shadow Europe: alternative European financial geographies,” which began to tackle the idea of shadow finance in Europe and the size and inseparability of what was regarded as “shadow” from “normal” financial flows. A number of the observations made have proved remarkably prescient and one particular phrase stands out in the light of the recent revelations about the so‐called Panama Papers in 2016: “Strategically important flows of capital derived from complex underground production systems that have seldom been analyzed in detail move through the European financial networks that connect to offshore tax havens (Christensen, 2003). These havens are not a separate and distinct entity from the financial networks that connect world cities but rather a vital counterpart on which the functioning of the cities connected via those networks depends” (2007, p. 319). The revelation of the Panama Papers constitutes a new critical juncture from which to re‐visit that 2007 paper and to re‐examine the state of knowledge on shadow and formal financial flows.

Financial Geography: The Geographical Nature of the Financial Economics

The evolving architecture of the financial world pays attention on space structure of financial activities. I discuss literature about role of space in financial economics. This paper is concentrated on one question: How to grasp the conundrum of financial geography?

Deep finance: sovereign debt crises and the secondary market ‘fix’

Links between ballooning national debts and official aid conditionalities are well understood. Private sovereign debt markets, in contrast, have been largely overlooked outside mainstream economics. Yet, since the 1980s, a ‘secondary market regime’ in sovereign bonds has transformed financial geographies and legal practices, facilitating the build-up of riskier sovereign debts and strengthening specialized distressed debt investors. This secondary market ‘fix’ has enabled the international financial system to muddle through successive crises. Using the recently concluded Argentine debt saga as an example, I show how the secondary market regime’s effects on debtors are intertwined with, but distinct from, those of structural adjustment programmes; in cases of resistance to neoliberalism, ‘deep’ secondary market debt structures serve to push countries (back) into the neoliberal fold.

Finance de marché et fonds d’investissement durables : la coupure au territoire

Cet article s’inscrit en geographie de la finance et montre, a l’aide de diverses etudes de cas, comment l’industrie financiere, en s’appropriant le concept de developpement durable de maniere particuliere, a construit sa propre approche de la « valeur financiere durable » dans le cadre des fonds d’investissement socialement responsable (ISR). Il explique la maniere dont l’industrie financiere auto-valide son action en matiere de finance « durable » par le recours a des organisations (agences de notation extra-financiere et ONGs), des personnalites (experts, leaders d’opinion) ou des institutions (organisations internationales) qui, par leur reputation ou leur position, legitiment la « valeur durable ». Or, si ces acteurs parviennent a animer le debat mediatique, scientifique et politique, ils restent largement sous l’influence de l’industrie financiere et ne remettent pas en cause l’essence meme des produits financiers, la coupure au territoire. L’absence de territorialisation et de contextualisation territoriale empechent toute approche forte de la durabilite, fondee sur les acteurs locaux et une operationnalisation sur un territoire donne.

Financial geography I: Geographies of tax

Taxation in general and tax evasion in particular are inherently geographical in nature, but only a small number of geographers have focused on them. In this progress report I present geographers’ research on offshore financial centres alongside the work of researchers from other disciplines to present an overview of what we know about the geographies of tax evasion and avoidance. It is argued that not only much regulatory work but also much research remains to be done on tax havens.

Demystifying Money: Fictions of Capital and Credit

The 2007 global financial crisis fueled critical scholarship on the geographies of finance, money, credit and debt. This research led to calls for clarifying and demystifying modern money and credit to better understand the proliferation of debt, austerity, and inequality within the contemporary nexus of capitalist class relations, and the broader imperative of managing global economic growth and crises under financialization. This article contributes to demystifying modern money by outlining two prominent historical-theoretical narratives of money: commodity-money and credit-money. These monetary narratives in turn reflect the dialectical imperatives of capitalist social relations, especially capital/labor conflicts, but also the congealing relations between finance capital and the state. Critical analysis demonstrates that both these contradictory monetary narratives are manifest within the institutional design and policies of the U.S. monetary system. This monetary framework is institutionalized through a monetary geography of power that operates through the hegemonic networks of the U.S. Federal Reserve System. This is demonstrated by incorporating the credit-money account into a Marxian framework, which is employed at the national scale to analyze the functional contradictions, history and institutional structure of the U.S. monetary system. The competing money narratives, explicit within the functional design of the Fed System itself, reflect the capitalist state's attempt to reconcile competing social agendas between capital and labor. The mystified monetary fictions underlying monetary authority obscure the political power of commodity-money and the bond/financial markets and class interests they serve, as well as mask the reality and progressive fiscal possibilities of the U.S. Federal Reserve credit-money system.

NEW FINANCIAL SPACES DRAWN BY INSTITUTIONAL REGULATORY BARRIERS. WHAT EFFECTS ON TERRITORIAL SUSTAINABLE DEVELOPMENT?

Financial flows affect sustainability. Financial regulation has a central role in sustainable development of regions. Recent crisis of 2008 has shown how financial space equilibrium is entangled with economic stability of territories so that changes in financial space can transform local and global financial conditions. Considering the need to develop sustainable relations between financial space and real economy, the aim of this article is to examine, from a geographical perspective, how international institutions may create or reduce, through regulatory mechanism, barriers to the effects of uncontrolled financial flows. Reproducing spaces involved and drawing results using cartography, poles and barriers are considered. As result, a space is outlined where is possible to study future diffusion patterns and consider if the barrier system observed reveals to be absorbing in the sense that financial contagion prevention is achieved with a significant reduction of risk, or if it is not absorbing so that risk shifts to lower levels of geographical scale reaching for the intersections between financial space and everyday economic life of territories involved. Key Words: Financial space, Financial flows, Financial Geography, International Institutions, Regulatory barriers