A Minskian extension to Kaleckian dynamics

Eric Kemp-Benedict ()

MPRA Paper from University Library of Munich, Germany

Abstract: Minsky’s financial instability hypothesis (FIH) has been criticized as suffering from a fallacy of composition that violates a central thesis of Kalecki. Nevertheless, Minsky’s description of borrowing and lending behavior is sufficiently compelling that it continues to drive new research. In this paper we propose a modified Kaleckian model in which a behavioral rule captures Minsky’s microeconomic argument that firms and banks increase the leverage of new loans during booms, but which translates through Kaleckian dynamics into a falling debt-to-capital ratio at a macroeconomic level. The expanding loan-to-capital ratio drives a potential instability, but in utilization, rather than debt.

Keywords: financial instability hypothesis; Kalecki; Minsky; debt dynamics (search for similar items in EconPapers)
JEL-codes: E12 E32 (search for similar items in EconPapers)
Date: 2015-06-22
New Economics Papers: this item is included in nep-hpe, nep-mac and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:65186

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