On the Minskyan Business Cycle

Korkut A. Erturk

Chapter 9 in Advances in Monetary Policy and Macroeconomics, 2007, pp 158-173 from Palgrave Macmillan

Abstract: Abstract Minsky’s seminal contribution was to underscore the importance of speculation in economic activity. Emphasizing that a firm’s investment decision is inherently a speculative one, he reintroduced asset prices into the Keynesian theory of investment. Any decision to acquire real capital assets, as he was keen to emphasize, bequeathes the firm a certain liability structure that shapes its balance sheet for a long time to come. This liability structure is either validated or contradicted by future events, with possibly dire consequences since firms’ expected returns might never be realized. Yet, despite this emphasis on the speculative character of investment decisions, Minsky paid little attention to asset price speculation per se, ignoring asset price bubbles and their macroeconomic effects.

Keywords: Monetary Policy; Business Cycle; Asset Price; Money Supply; Future Price (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-80076-2_9

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DOI: 10.1057/9780230800762_9

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