The paradox of debt and Minsky cycle: Nonlinear effects of debt and capital, and variety of capitalism

Yuki Tada

No 2304, Working Papers from New School for Social Research, Department of Economics

Abstract: The main aim of this paper is to study the variety of financialized capitalism which are contingent on the institution, policy, and path dependency. Using the neo-Kaleckian model we study to model the US and UK shareholder-oriented financialized capitalism using our own version of the Minskyan cycle. Meanwhile, Japanese partially fledged financialized capitalism with high retention rates of firms is analyzed by using the paradox of the debt (Steindl) cycle. The analysis shows (1) instability arises when firms have a high retention rate of profit to deleverage; (2) debt-led Minsky regime and the debt-burdened paradox of debt regime can be distinguished by setting sufficiently low retention rates for the former and sufficiently high retention rate for the latter; (3) both in the Minskyan and Steindl regime we observe fixed capital investment is sluggish and observe secular stagnation in accumulation rate; (4) in the Steindl paradox of debt model, the debt-burdened economic stagnation transforms into a long wave cyclical growth with sufficiently high firms animal spirits, which exhibits the possibility of the investment-led cyclical growth after the secular stagnation from the paradox of debt.

Keywords: Minsky; paradox of debt; capitalism; growth; financial instability; supercycle (search for similar items in EconPapers)
JEL-codes: B52 D21 E12 E32 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2023-04
New Economics Papers: this item is included in nep-ban, nep-des, nep-fdg, nep-hme, nep-mac and nep-pke
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http://www.economicpolicyresearch.org/econ/2023/NSSR_WP_042023.pdf First version, 2023 (application/pdf)

Related works:
Journal Article: The paradox of debt and Minsky cycle: Nonlinear effects of debt and capital and variety of capitalism (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:new:wpaper:2304

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