Dr Stefanos Ioannou

In this paper we focus specifically on start-ups in remote rural island entrepreneurial ecosystems (EEs) and consider the differences between these entrepreneurs compared to their mainland Scottish and UK counterparts.  We find that Island new start-up entrepreneurs tend to be older, less well educated, more likely to be female, and less likely to be from an ethnic minority. They borrow similar amounts of start-up capital than their mainland counterparts and are equally likely to survive.  Despite their geographical remoteness, this suggests that entrepreneurial activity makes a meaningful contribution to their respective EEs.   

How do credit rating agencies (CRAs) view China’s Belt and Road Initiative (BRI)? Our analysis of 132 countries in 2000-17 demonstrates that Chinese foreign investment adversely affects sovereign ratings of recipient countries when these countries participate officially in the BRI but is otherwise insignificant. These results indicate that rather than being a generic China bias, the BRI bias is a geopolitical bias, based on CRA’s expectation that BRI recipients become more dependant economically and politically on China. The main implication of our findings in financial terms is that CRAs limit the supply of international capital to BRI recipients. In broader terms of international political economy, this indicates a feedback loop whereby BRI funding repels Western funding and increases dependence on more BRI financing. Put differently, CRAs exacerbate the structural shift in the world political economy towards a decoupling between the US and Chinese financial spheres of influence.

We study the development of FinTech, defined as a set of innovations and an economic sector that apply recently developed digital technologies to financial services, with particular focus on payment and lending platforms, and digital asset management and online trading apps. We use mixed methods, including a theoretical exercise on the main balance sheet interactions involved in FinTech banking, and empirical insights from fieldwork in Latin America and the United States. Our analysis corroborates previous literature identifying several systemic risks in FinTech payment and lending platforms. These include the enhanced risk of a bank run, the increase in liquidity risk for incumbent banks, the fueling of precarious lending, and the potential compromise in the efficacy of monetary policy. Our discussion of online asset management and trading apps also highlights the risk of enhanced volatility in financial markets due to the increase in the participation of low-income and inexperienced investors. We observe that while the FinTech sector is still small in size, it already contains seeds of financial instability which should be all-too-familiar from recent history.

We examine the impact of Brexit on London as an international financial centre through the lens of the global financial network (GFN) framework, using quantitative data on selected key financial flows and stocks, as well as qualitative data from interviews and other sources. Our results show very limited impacts on London, and possible gains in New York and the USA rather than in the European Union. The results are compatible with the logic and history of sticky power in the global financial network. Despite some relocations from London, Brexit has not (yet) undermined London’s attractiveness to financial and business services, and the global connectivity they afford to London as an international financial centre. London remains the global conductor of offshore jurisdictions, a role which may be enhanced with more flexible regulation after Brexit. Any forecasts about the future impacts of Brexit on London need to consider the sticky power of the global financial network, and close relationships among its building blocks.

Is banking in the European Union still too-big-to-fail (TBTF)? We address this question by providing a critical overview of post-crisis banking regulation and examining whether financial markets continue to expect European governments to bailout TBTF banks. To the latter end we use a novel set of primary data, gathered from fieldwork in Europe, analyse credit ratings of TBTF banks, and compare them with the ratings of other European banks. Our results suggest that the expectation of government support for European banks is still present. Most notably, TBTF banks command a long-term credit rating about three notches higher than what would be the case in the absence of the expectation of government support. Other European banks enjoy significant rating uplifts too, albeit smaller in size. 

To extend the controversial literature on the finance-inequality nexus, we examine the determinants of income inequality in 131 developed and developing economies, in the period 1991- 2017.  We consider a wide range of variables associated with domestic financial development, banking crises and financial globalization, including financial secrecy and offshore wealth. In addition, we examine whether the spatial centralization of the financial sector is associated in any way with income inequality. The results show that the larger the size of the financial sector in a country, the higher the level of inequality. Financial globalization, in all its facets, also appears to contribute to inequality. These findings are particularly robust for developed economies. Our analysis also shows that aspects of finance aggravating inequality are positively associated with the degree of geographical centralization of the financial sector. 

This paper analyses the development of sub-sovereign debt in the Eurozone, based on a sample of 58 regional and municipal governments for the period 2004–17. The findings show that when examined from the prism of sub-sovereign debt, Eurozone countries cannot be readily divided into core and periphery, as conventionally done nationally. For many countries, a significant domestic variegation in local economic conditions is identified. Driving forces in the rise of debt positions are also varied. Despite such variegations, the analysis also confirms the overarching role of national governments in setting the fiscal and financial boundaries within which local governments operate.

For all of its iconic character and controversial influence, Goldman Sachs has received rather shallow scrutiny in social sciences. This article combines an in-depth case study of Goldman Sachs with a theoretical contribution at the nexus of financial geography and evolutionary economic geography. We contend that spatial arbitrage and regulatory capture are fundamental to the organizational resilience of financial firms. Using empirical evidence, we further argue that financial centers’ adaptive resilience is a product of their strategic positioning in financial firms’ value chains. We formalize this contribution with a framework describing a set of paper, cyber, relational, and technical dimensions of financial centers’ resilience and emphasizing regulatory capture in firms’ response and adaptation to shocks. We deploy our framework in a case study of the evolution of Goldman Sachs between 1999 and 2017, focusing on how it contributed and adapted to the financial crisis of 2008–2009. Using original quantitative data and interviews, we shed light on how, as a product of the crisis, the firm unbundled its New York metro operations toward Salt Lake City and how the latter evolved from a brass-plate center to the bank’s second largest U.S. office.

To address the paucity of research on the financial geography of Latin America and contribute to the emerging geographical literature on FinTech, we use quantitative financial data and qualitative insights from expert interviews, to explore the relationships between FinTech development and financial geography of the region, with focus on Brazil, Mexico and Argentina. We show that despite its fast growth driven by high costs of financial intermediation, policy of financial inclusion and financial regulation, FinTech in Latin America has thus far played out on the margins of the global FinTech industry and the margins of its financial systems, with limited impacts on financial inclusion. We argue that FinTech has not challenged but contributed to an already high level of concentration in the geographies of financial services in Latin America. This is affected by the proximity of FinTech firms to incumbent banks (which are active in FinTech), sources of capital and skilled labour, and reinforced by the fact that leading financial centres in Latin America are also the main centres of technology industry. Finally, we demonstrate that FinTech has not yet had a significant impact on the low level of financial integration in Latin America, with fragmentation determined by political, economic, and financial instability, combined with a lack of compatibility in financial regulation. Put together, our findings add to the literature that advocates a degree of scepticism about the impacts of FinTech on financial centres, if not the financial system overall.

Economic geographers typically associate Adam Smith with the pin factory, the division of labour, and the ‘invisible hand’ of the market. We show that a closer reading of The Wealth of Nations reveals a much richer and broader range of ideas, which we illustrate by focusing on six themes: methodology, the role of physical geography and land in development, urban scale, institutions, commercial centres, and financial geography. On commercial centres, for example, Smith offers a vivid elaboration of what causes a ‘home bias’ in international trade. Similarly, in a largely neglected part of the book, Smith offers a thorough set of reflections as to what turned Amsterdam into the leading financial centre of Europe during the seventeenth century and eighteenth centuries. Overall, we argue that in all these themes and across them, Smith offers insights valuable to contemporary economic geography, making the Wealth of Nations worthy a place in an anthology of the discipline.

We use data from 131 countries in the period 2000–14 to analyze the determinants of urban primacy, calculated as the share of the city with the largest gross domestic product (GDP) in a country in the total GDP of that country. While prior research has largely neglected the role of financial factors, we demonstrate that urban primacy is related positively to the size of financial activity. In addition, currency depreciation in relation to the US dollar is related to lower urban primacy, while gross capital outflows are related to higher urban primacy. We find that trade openness—a key indicator of globalization—also coincides with higher urban primacy, but this relationship is statistically and economically less significant than that between finance and urban primacy. Among other factors, we show that urban primacy is smaller in countries with a large population, high population density, a large agricultural sector, and a federal political structure, and particularly high in countries where primate cities have seaport functions. Our main results hold in both developed and developing countries. We discuss a wide range of mechanisms through which finance can affect urban primacy, including agglomeration economies, proximity to power, access to capital, financialization, and financial instability. In short, finance has a crucial impact on the geographic distribution of economic activity.

We investigate whether credit rating agencies are biased towards areas with strong financial centre characteristics, using data for 259 areas from 39 countries for 2004–17. We employ a range of measurements of financial centre characteristics, including a financial centre index, the share of financial and business services in an area’s total employment, and revenues from investment banking. For all financial centre proxies, our results confirm the existence of a ‘financial centre bias’ that is statistically and economically significant. For example, cities present in the global financial centre index have a rating about a category higher than would be justified by fundamentals.

We examine the relationship between finance and economic growth in the metropolitan areas of 75 countries at various stages of economic development in the period 2001–2015. Our analysis demonstrates an inverted-U shaped relationship between finance and growth. This relationship becomes even more significant in the areas of a country outside its largest financial centre, indicating that while these areas can benefit from financial development, they are also the most vulnerable. We show that large financial centres can have an impact on growth across their national economies, but in doing so they complement rather than replace local financial centres. Overall, our results highlight the risks associated with the excesses of financial development and lend evidence to support calls for more decentralised financial systems.

This paper offers an informed commentary on the actual and potential impacts of the pandemic on financial markets, sector and centres, grounded in literature on financial centres, the state-finance nexus, and trends affecting the landscape of finance since the global financial crisis. We expect a slowdown in new financial regulation, continued firm-level consolidation, and a continued rise of business services related to finance. The application of new financial technologies is likely to accelerate, affecting retail banking in particular, but will not necessarily be led by FinTech firms. Local and regional financial centres are likely to face larger challenges than leading international centres. As the panic and partial recovery in financial markets in March and April 2020 highlighted the significance of the international monetary hierarchy, with the US$ in the lead, a radical shift of financial power to Asia seems unlikely.

More than ten years after the global financial crisis, what has happened to the ‘too-big-to-fail’ (TBTF) banks whose reckless behavior was among its preconditions, but which received public support and guarantees in the midst of that crisis? Insofar as this too-big-to-fail status helped create the crisis and then imposed costs on the rest of society, we would expect these banks to have shrunk. We investigate the evolution of 31 global-TBTF banks and find that their overall size has hardly recorded any substantial change. However, there is no sense of urgency in the flourishing post-crisis literature on TBTF banks about the need to contain their size; the prevalent view therein is that if properly regulated, the risks that arise from a financial system dominated by TBTF banks are manageable. This view rests on the same overly narrow theoretical underpinnings whose flaws were exposed in the crisis. We argue that too-big-to-fail banking is embedded in a set of self-reinforcing policies—consolidation, balance-sheet support through quantitative easing, favorable regulations, bank lobbying, and geo-economic and geo-political considerations—which explain why these banks have not shrunk and why they remain a threat to financial stability, well after the lessons of the crisis should have been learned.

Born as a term with a critical connotation towards finance, financialization has been widely employed in social sciences, despite the vagueness often surrounding it. In this article we discuss the concept of financialization with a focus on three dimensions. First, we highlight the crucial role of theory in shaping the depth of one’s understanding of the term. Second, we discuss the merits and limitations of the term as a means for bringing together researchers from different communities. Third, we reflect on its future. We argue in particular that the various phenomena associated with financialization involve different boundaries and temporalities. These differences are important, first for appreciating the openness of possible outcomes, and second, for anticipating potential convergences in scholarly perceptions of financialization that might occur in the near future.

Despite the centrality of finance in the workings of the modern capitalist economy, macroeconomics is still taught with no serious consideration of monetary and financial dynamics. This has become even more puzzling in the light of the recent financial crisis. Our paper discusses a more pluralistic framework for teaching basic macroeconomics, inclusive of some of the most important ideas of Keynes on interest and money. The incorporation of Keynesian economics not only allows students to broaden their thinking in considering alternative answers to given questions; it also reshapes the questions themselves. In doing so, it changes the framework within which students come to think of policy. Focusing on the case of monetary policy, we point out the commonality between the mainstream teaching paradigm and the actual mindset that influences policy making. Furthermore, we discuss the ways in which the scope and aims of monetary policy are altered under a Keynesian/Minskyan framework.

Operating in the context of deregulated financial markets, credit rating agencies do not only ‘provide an opinion’, but also affect macroeconomic dynamics. By utilizing a two-country stock flow consistent model that provides a representation of the Eurozone, the paper connects the movements of sovereign ratings with the dynamics of the financial market and the constraints on fiscal policy. With endogenous fiscal expenditure and an endogenous credit rating mechanism the model shows how following a recessionary shock, a rating downgrade can influence the financial constraints that surround a government, pushing it toward fiscal austerity and thereby deepening the already ongoing recession.

The current paper investigates the impact of sovereign ratings on sudden stops of capital in the context of the Eurozone. Our analysis focuses on the qualitative aspect of ratings on the hypothesis that such aspect has a concrete impact on capital movements. A panel probit model is utilized for our purposes. We distinguish between net and gross capital inflows, while we also draw a distinction between long-term and short-term oriented capital. Our results confirm the influence of sovereign ratings for the majority of our model specifications. They also appear to be most significant in the case of short-term flows.

We investigate the relationship between community belongingness and small business banking in Scotland, focusing on Scottish Islands, specifically, Shetland, Orkney, and Outer Hebrides. These islands provide a unique case study as they form the majority of British Isles, not counting Crown Dependencies and British Overseas Territories. Within Scotland, these are also the localities with the strongest sense of community. Our analysis is based on quantitative methods and uses detailed survey data for small businesses across Scotland, for the period 2016- 2019. Our findings show that Scottish islands are positioned at the top, or near it, in the share of small businesses describing a strong working relationship with their main bank. The positive relationship between community belongingness and businesses’ attitude towards their banks also holds more broadly, across Scotland. These findings seem to indicate the continuing relevance of soft information, or else tacit knowledge, in small business banking.