Debt and investment in the Keen model: a reappraisal of modelling Minsky

Antonin Pottier and Adrien Nguyen-Huu

Review of Keynesian Economics, 2017, vol. 5, issue 4, 631–647

Abstract: We examine to what extent the Keen model (Keen 1995) is a faithful modelling of Minsky's financial instability hypothesis. We focus on debt, money, and debt-induced crisis. We propose a clear interpretation of the debt: households lend unconsumed income to firms to finance their investments, and money creation is not necessary. We offer a detailed description of the economic collapse and analyse its causes thanks to numerical experiments. The crisis is triggered by profits squeezed by wages and not by debt overhang. We test alternative assumptions on the investors' behaviour to show that behaviour at very low profits is fundamental. We conclude that the Keen crisis has few Minskyan flavours.

Keywords: Keen model; financial crisis; Minsky; endogenous money; investment; debt (search for similar items in EconPapers)
JEL-codes: C63 E12 E32 E51 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Debt and Investment in the Keen Model: a Reappraisal of Modeling Minsky (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:elg:rokejn:v:5:y:2017:i:4:p631-647

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