Institutional Prerequisites of Financial Fragility within Minsky's Financial Instability Hypothesis: A Proposal in Terms of 'Institutional Fragility'

Christine Sinapi ()

Economics Working Paper Archive from Levy Economics Institute

Abstract: The relevancy of Minsky's Financial Instability Hypothesis (FIH) in the current (and still unfolding) crisis has been clearly acknowledged by both economists and regulators. While most papers focus on discussing to what extent the FIH or Minsky's Big Bank/Big Government interpretation is appropriate to explain and sort out the crisis, some authors have also emphasized the need to consider the institutional foundations of Minsky's work (Whalen 2007, Wray 2008, Dimsky 2010). The importance of institutions within the FIH was strongly emphasized by Minsky himself, who assigned them the function of constraining the development of financial fragility. Yet only limited literature has focused on the institutional aspects on Minsky's FIH. The reason for this may be that they were mainly dealt with by Minsky in his latest papers, and they have remained, to some extent, incomplete, unclear, and even ambiguous. In our view, a synthesis of Minsky's proposals, along with a clarification and theoretical justification, remains to be done. Our objective in this paper is to contribute to this theoretical project. It leads us to propose that the notion of "institutional fragility" can constitute a useful perspective to complement and justify the endogenous development of financial fragility within the FIH. Eventually, this view may contribute to the debate about international financial governance.

Keywords: Financial Crisis; Financial Fragility; Institutional Fragility; International Financial Governance (search for similar items in EconPapers)
JEL-codes: G01 G20 G28 (search for similar items in EconPapers)
Date: 2011-07
New Economics Papers: this item is included in nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.levyinstitute.org/pubs/wp_674.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lev:wrkpap:wp_674

Access Statistics for this paper

More papers in Economics Working Paper Archive from Levy Economics Institute
Bibliographic data for series maintained by Elizabeth Dunn ( this e-mail address is bad, please contact ).