Financial Fragility, the Minskian Triad, and Economic Dynamics

Piero Ferri and AnnaMaria Variato

International Journal of Political Economy, 2010, vol. 39, issue 2, 70-82

Abstract: This paper emphasizes the relationship between financial fragility and economic dynamics. It uses the Minskian microeconomic categories based on the "triad: hedge, speculative, and Ponzi" finance and puts them into a macro perspective. In this environment, there can be a sharp distinction between solvent systems and crisis equilibria. This dichotomy can be analyzed by means of a regime-switching mechanism. The interaction between financial and real aspects is capable of generating persistent fluctuations that are the natural humus where behavior à la Ponzi can take place and financial instability phenomena are generated.

Date: 2010
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DOI: 10.2753/IJP0891-1916390206

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