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The Current Financial Crisis, Monetary Policy, and Minsky's Structural Instability Hypothesis

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  • Domenica Tropeano

Abstract

The object of this work is to evaluate the monetary policy issues that arose during the financial crisis of 2007-8 according to Minsky's thought. It is argued that Minsky's idea of structural instability may fit the policy problems linked to the crisis. In particular, Minsky's contribution to the theory of central banking is used to evaluate the conduct of the Federal Reserve during the crisis. Minsky's reading of the roles of the central bank in the presence of sophisticated markets and securitization is helpful in understanding both the failure of the Federal Reserve in preventing the crisis and the relative success in mitigating the effects. This apparent success notwithstanding, the paper warns that economic policy, to promote stability, must enlarge the stability field of the system by changing the type of institutions operating there and their business habits.

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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal International Journal of Political Economy.

Volume (Year): 39 (2010)
Issue (Month): 2 (July)
Pages: 41-57

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Handle: RePEc:mes:ijpoec:v:39:y:2010:i:2:p:41-57

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=110909

Related research

Keywords: central banking; financial crisis; Minsky; monetary policy; securitization; structural instability;

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Cited by:
  1. Passarella, Marco, 2011. "From the village fair to Wall Street. The Italian reception of Minsky’s economic thought," MPRA Paper 49593, University Library of Munich, Germany.
  2. Tropeano, D., 2013. "Financial Fragility in the Current European crisis," CITYPERC Working Paper Series 2013-09, Department of International Politics, City University London.

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