Is Minsky’s Financial Instability Hypothesis Valid?

Sebastien Charles

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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.

Keywords: Debt ratio; Financial instability; Minsky; Retention rate (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (9)

Published in Cambridge Journal of Economics, 2016, 40 (2), pp.427-436. ⟨10.1093/cje/bev022⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01346440

DOI: 10.1093/cje/bev022

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