Is Minsky’s financial instability hypothesis valid?

Sebastien Charles

Cambridge Journal of Economics, 2016, vol. 40, issue 2, 427-436

Abstract: In this article I reassess the validity of Minsky’s financial instability hypothesis and the main criticism about its internal coherence. Starting from this fundamental objection, I study Minsky’s contribution within the scope of a highly simplified macro-model. It is shown that the financial instability hypothesis (increasing debt ratios during economic expansion) remains valid in numerous cases. It appears, amongst other things, that a sufficient fall in the retention rate reinforces Minsky’s conclusions, emphasising the destabilising role of shareholders in the distribution of net profits.

Date: 2016
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Working Paper: Is Minsky’s Financial Instability Hypothesis Valid? (2016)
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