Michael H. Grote slide 1 The rise (and fall?) of the Financial Center Frankfurt Locations of Foreign Banks in Germany Michael H. Grote Johann Wolfgang Goethe-Universität Frankfurt a.M. Vortrag im Rahmen der 90-Jahr Feier der Johann Wolfgang Goethe- Universität Frankfurt 7. Juli 2004

Michael H. Grote slide 2 setting  national financial players tend to concentrate GBLondon J Tokyo D Frankfurt USNew York, Chicago F Parisetc.  borders are vanishing introduction of Euro deregulation  information and communication technologies ubiquitous & instant information remote access  what will happen to national financial centers in EU?

Michael H. Grote slide 3 literature  literature on financial centers is focusing on static phenomena  why there are financial centers at all? micro-economic view on agglomeration effects  why do they occur in certain countries? macro-economic studies to isolate national factors  development of financial centers almost absent from the literature

Michael H. Grote slide 4 U  the decline of agglomerations is not very well addressed  new economic geography: U-shaped development share of region 1 resp. 2 of manufacturing sector level of transport costs share of region 1 (= success) share of region 2 (= failure) 0,5 historical accident ~ window of opportunity

Michael H. Grote slide 5 why Frankfurt?  Frankfurt  by far the predominant financial center in Germany, second in Europe  got predominant position in Germany only after World War II from Berlin, starting virtually from scratch  emerged after a competition between several cities  almost a laboratory case for financial center development:  is interesting on its own, but  serves as a test for theory

Michael H. Grote slide 6 historical accident  before World War II, Berlin was the leading financial center in Germany  but was not able to continue this function afterwards  three cities were in competition for succession:  Düsseldorf  by far largest industrial hinterland (Ruhrgebiet)  share of lending activties almost 40% in West Germany after war  functioning payment system  Frankfurt  central location  location of American military headquarter…  got seat of central bank in 1948  starting point for development  Hamburg  second biggest center  large banks had moved departments from Berlin  Reichsbank also  more stock exchange turnover than all others combined after war  less destroyed than others  port

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Michael H. Grote slide 9 … inverted U-shape

Michael H. Grote slide 10 U-shape and U-shape? GER EU transport cost Frankfurt‘s share of banks at … scale ? ? transport cost

Michael H. Grote slide 11 Thank you for your attention!

Michael H. Grote slide 12 The rise (and fall?) of the Financial Center Frankfurt Locations of Foreign Banks in Germany Michael H. Grote Johann Wolfgang Goethe-Universität Frankfurt a.M. Vortrag im Rahmen der 90-Jahr Feier der Johann Wolfgang Goethe- Universität Frankfurt 7. Juli 2004