 It happened again: A Minskian analysis of the subprime loan crisisDamiano B. Silipo Journal of Economics and Business, 2011, vol. 63, issue 5, 455 pages Abstract: The advanced countries are now going through the worst crisis since the Depression, but today's dominant current theories and econometric models proved unable to predict the crisis. The paper investigates whether the financial instability hypothesis of Hyman P. Minsky offers a better explanation. Minsky argued that in a period of economic growth and tranquility economic agents are more prone to take risk, and banks are more willing to finance borrowers. Meanwhile, in the course of the boom over-indebtedness and financial innovations make the financial system more fragile, and more exposed to adverse effects. We show that both these effects made themselves felt in the subprime loan crisis. Specifically, the main determinants of the crisis have been the increasing appetite for risk and financial innovations. So, we conclude that, although this crisis differs in some of its features from previous crashes and from Minsky's account, the mechanisms underscored by Minsky were and are nevertheless at work. Keywords: Subprime; loans; crisis; Financial; instability; hyphothesis; Determinants; of; the; boom; and; bust; Minskian; analysis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:63:y:2011:i:5:p:441-455 Access Statistics for this article Journal of Economics and Business is currently edited by Emanuele Bajo and Moritz Ritter More articles in Journal of Economics and Business from Elsevier |
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