Systemic financial fragility and the monetary circuit: a stock-flow consistent approach

Passarella Marco
Authors registered in the RePEc Author Service: Marco Veronese Passarella

MPRA Paper from University Library of Munich, Germany

Abstract: In the last few years, a number of scholars has referred to the crop of contributions of Hyman P. Minsky as required readings to understanding the tendency of the capitalist economies to fall into recurring crises. The so-called ‘financial instability hypothesis’ of Minsky relies, however, on very disputed assumptions. Moreover, Minsky’s analysis of capitalism must be updated on the basis of the deep changes which, during the last three decades, have concerned the world economy. In order to overcome these theoretical difficulties, section 2 of the paper deals with the analytical structure of the financial instability theory, showing why this latter cannot be regarded as a general theory of the business cycle. Sections 3, 4 and 5 deal with a simplified, but consistent, re-formulation of some of the most disputed aspects of Minsky’s theory by cross-breeding it with inputs from the ‘Circuitist’ approach and the current Post Keynesian literature. In sections 6 and 7 we analyze the impact of both capital-asset inflation and consumer credit on the financial ‘soundness’ of the economy, within a simplified stock-flow consistent monetary circuit model. Some concluding remarks are provided in the last part of the paper (section 8).

Keywords: Financial Instability; Stock-Flow Consistency; Monetary Theory of Production (search for similar items in EconPapers)
JEL-codes: B50 E12 E32 E44 (search for similar items in EconPapers)
Date: 2011-01-28
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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