Financial instability and functional finance: a Lerner-Minsky perspective

Faruk Ülgen

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Abstract: The 2007/08 financial crisis results in two major problems that issue difficult challenges for the economic theory and policy. The first challenge is the rise of unemployment notwithstanding growing imbalances of budget deficits. The second is the monetary and financial instability threatening the permanence of economic development. In response to these two challenges a reappraisal of the functional finance approach of Abba Lerner and of the financial instability hypothesis of Hyman Minsky seems to be a relevant way of reconsidering the pitfalls of the working of capitalist economies. Consistency of public interventions in face of growing unemployment and atonic economic activity rests on the new principles that should guide financial system's reform in order to deal with the malfunctioning of liberalized markets.

Keywords: economic crisis; financial crisis; regulation; financial instability (search for similar items in EconPapers)
Date: 2012-10-18
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00843754v1
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Published in 24th annual conference of the European association for evolutionary political economy "Economic policy in times of crisis", Cracow university of economics, Oct 2012, Cracovie, Poland

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Working Paper: Financial instability and functional finance: a Lerner-Minsky perspective (2014)
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