Alexandre Lamfalussy and the origins of instability in capitalist economies

Ivo Maes ()
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Ivo Maes: Chaire Robert Triffin, Université catholique de Louvain & ICHEC Brussels Management School

No 436, Working Paper Research from National Bank of Belgium

Abstract: In this paper the vision of the “Young” and “Elder” Lamfalussy on the origins of instability in capitalist economies will be contrasted. The young Lamfalussy found the origins of instability in medium-term cumulative processes in the real sector of the economy, very much inspired by the vicious circles in the British and Belgian economies in the postwar period, in contrast to the virtuous growth processes of the German and Italian economies. The Elder Lamfalussy focused on financial innovations and the short-term myopic behavior of financial markets, very much inspired by his experience of the Latin American debt build-up and ensuing crisis in the early 1980s. The Euro area crisis showed the importance of both processes, as it was the consequence of both short-term myopic behavior in financial markets and medium-term cumulative processes in the real sector.

Keywords: Lamfalussy; economic instability; economic cycles; financial innovations; Latin American debt crisis; Euro area crisis. (search for similar items in EconPapers)
JEL-codes: A11 B22 B32 E E3 F02 G10 N10 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2023-03
New Economics Papers: this item is included in nep-des, nep-his, nep-hme, nep-hpe, nep-mac and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:202303-436

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