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Cities and the Geography of Financial Centres

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  • Gehrig, Thomas

Abstract

This paper surveys the literature on the geography of financial activity in order to assess the role of financial centres. While there is widespread concern that rapid technological progess especially in communication and information technologies will ultimately lead to a delocalization of financial activity, the role of financial centres depends delicately on their success in generating local externalities. On the basis of empirical evidence on recent developments in world financial markets, it is argued that the ability of financial centres to attract financial activity in information sensitive securities will be crucial for their future role. To the extent that information is localized and market access is costly, financial centres perform an important role in aggregating local information. Therefore a reduction of global market access and information costs may increase global demand for local securities, and even strengthen the role of certain financial centres. Furthermore, complementarities between informationally sensitive and less sensitive financial activities may also attract footloose activities to financial centres.

Suggested Citation

  • Gehrig, Thomas, 1998. "Cities and the Geography of Financial Centres," CEPR Discussion Papers 1894, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1894
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    More about this item

    Keywords

    financial centres; information sensitivity; local information; market access costs; thick market externalities;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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