In the global economy, international financial markets play a major role, and provide substantial benefits to the economy of their countries. They are a challenge both nationally and globally, and many economists and historians have sought to create hierarchies for these places. Above all, a hierarchy should be able to define an international financial center. It can be considered as "the aggregate of a number of financial services in a given urban space." It is, simply, "the place where the actors coordinate financial transactions." The difficulty of accurately prioritizing these places comes from the multitude of classification criteria, and it is necessary to list a few as examples.
Some criteria of classification are:
- The number of foreign banks;
- (The relative amount of bank deposits by non-residents);
- The size of the major financial institutions;
- The development of capital markets;
- The number of employees in the financial sector.
This non-exhaustive list of criteria helps us get an idea of the importance of a global financial center. However, the domination of a place or the lack of it can only be understood "in the economic, political, social and cultural development of an era." Before 1914 and to a lesser extent after the war, the dominance of London was complete, World War II changed the hierarchy, and in 1944 New York emerged as the dominant entity.
What are the changes in the ranking of the two largest financial centers? What can explain the financial domination of one over the others? Why are London and New York dominant?
Tags: International financial markets, international financial centre, capital market, financial sector, investment banks
[...] Despite the devaluation of the pound in 1967 which was interpreted as a sign of decadence at the time, the return of the City as a power in the financial world was in no doubt Despite the progress in London, New York maintained its lead While London found an important place in the world order, New York did not lose its lead. This is explained by the fact that New York was ranked first due to its national activities and the power of its economy. [...]
[...] However, New York remains the financial center of the world, and the most influential among the two, in that it symbolizes America's economic superpower. Bibliography - Macroeconomics and business: An interactive Approach, by Nadia Tempini Macdonald - Sassen, Saskia. The global city. New York, London, Tokyo: Princeton University Press, Princeton - Saskia Sassen, Global financial centers - Foreign Affairs - foreignaffairs.org - Xiying Ivy Zhang, Economic Consequences of the Sarbanes-Oxley Act of 2002, University of Rochester, February 2005. - Zukin, S. [...]
[...] It became a world leader thanks to: - The position of the dollar as an international currency; - The strength of its financial institutions that financed a portion of aid to Europe. - Commercial banks and investments banks in New York that became the largest in the world. The city's purse experienced strong growth, as the Dow Jones rose from 260 points in 1953 to 650 in 1960. Nevertheless, it was necessary to provide some limits to this hegemony, which was very different from that of London before 1914. Firstly, we must keep in mind the national and international aspect of New York. It is primarily a market where U.S. [...]
[...] However in other areas, New York suffers the brunt of competition from other American cities like Chicago or Boston, and thus finds itself relegated to a position behind other world places. London is second only to New York in this competition. A representative figure of the size of a stock exchange, is that the number of persons employed in New York is against in the City in 2004. Thus, London is close to New York, though it has a much smaller economy. [...]
[...] In addition, we were in a period when capital movements were rather limited compared to the movement before 1931 and after 1980, and where regulations were binding (impossible for banks to expand into other states by example); two points that somewhat qualify the power of New York London: behind New York, in spite of significant assets However, if the dominance of New York during this period is certain, we must not underestimate the power of London. The City of London suffered from two problems: - The first was the weakness of the British economy which was struggling to support an international financial center, and was faced with two devaluations of the pound (1949, 1967). [...]
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