A sectoral analysis of the financial instability hypothesis

Robert F. Mulligan

The Quarterly Review of Economics and Finance, 2013, vol. 53, issue 4, 450-459

Abstract: Hyman Minsky's Financial Instability Hypothesis (FIH) is applied to various North American Industrial Classification System (NAICS) industry groups, and it is found that some sectors develop much more closely in accordance with the FIH than others. Minsky categorized firms based on the relationship between cash flow and debt service requirements: hedge finance units, whose operating revenues are adequate to service current interest and principal on their debt; speculative finance units, which can meet interest payments but cannot pay down principal; and Ponzi finance units, which cannot meet current interest payments. The FIH is related to, as well as supportive of, Austrian Business Cycle (ABC) theory, because interest rates are negatively correlated with the proportion and market value of speculative firms in several sectors.

Keywords: Hedge; Speculative; Ponzi finance units; Debt depreciation; Malinvestment liquidation; Overconsumption (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976913000422
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:53:y:2013:i:4:p:450-459

DOI: 10.1016/j.qref.2013.05.010

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().