A contribution to the theory of financial fragility and crisis
AbstractThe paper outlines formally three interrelated facets of a financial crisis of domestic origin: (i) a debt financed consumption boom supported by rising asset prices that ends in debt deflation; (ii) a related process of financial evolution of economic agents towards Ponzi finance; (iii) resulting systemic illiquidity afflicting the financial sector as a prelude to crisis. Being placed in relation to theories of exogenous and endogenous money, the models indicate how the co-evolution of the real and the financial sector results in financial fragility of different types. The paper explores formally the specific features of the fragility of various episode of crisis, which share a common pattern of gradual build up followed by a sudden collapse of financial confidence through the interaction between the real and the financial sector, and concludes with implications for policy. Copyright The Author 2011. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Oxford University Press in its journal Cambridge Journal of Economics.
Volume (Year): 35 (2011)
Issue (Month): 6 ()
Contact details of provider:
Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
Fax: 01865 267 985
Web page: http://www.cje.oupjournals.org/
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Engelbert Stockhammer & Robert Stehrer, 2011.
"Goodwin or Kalecki in Demand? Functional Income Distribution and Aggregate Demand in the Short Run,"
Review of Radical Political Economics,
Union for Radical Political Economics, vol. 43(4), pages 506-522, December.
- Engelbert Stockhammer & Robert Stehrer, 2009. "Goodwin or Kalecki in Demand? Functional Income Distribution and Aggregate Demand in the Short Run," Working Papers wp203, Political Economy Research Institute, University of Massachusetts at Amherst.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2008.
"This Time is Different: A Panoramic View of Eight Centuries of Financial Crises,"
NBER Working Papers
13882, National Bureau of Economic Research, Inc.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 1065-1188, November.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," CEMA Working Papers 595, China Economics and Management Academy, Central University of Finance and Economics.
- Thomas I. Palley, 2008.
"Financialization: What it is and Why it Matters,"
IMK Working Paper
04-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
- Thomas I. Palley, 2007. "Financialization: What It Is and Why It Matters," Economics Working Paper Archive wp_525, Levy Economics Institute.
- Thomas I. Palley, 2007. "Financialization: What It Is and Why It Matters," Working Papers wp153, Political Economy Research Institute, University of Massachusetts at Amherst.
- Marc Lavoie & Wynne Godley, 2000.
"Kaleckian Models of Growth in a Stock-Flow Monetary Framework: A Neo-Kaldorian Model,"
- Marc Lavoie & Wynne Godley, 2000. "Kaleckian Models of Growth in a Stock-Flow Monetary Framework: A Neo-Kaldorian Model," Economics Working Paper Archive wp_302, Levy Economics Institute.
- Amit Bhaduri & Kazimierz Laski & Martin Riese, 2006. "A Model Of Interaction Between The Virtual And The Real Economy," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 412-427, 07.
- Schaede, Ulrike, 1989. "Forwards and futures in tokugawa-period Japan:A new perspective on the Dojima rice market," Journal of Banking & Finance, Elsevier, vol. 13(4-5), pages 487-513, September.
- Engelbert Stockhammer & Ã–zlem Onaran & Stefan Ederer, 2007.
"Functional income distribution and aggregate demand in the Euro-area,"
Department of Economics Working Papers
wuwp102, Vienna University of Economics, Department of Economics.
- Engelbert Stockhammer & �zlem Onaran & Stefan Ederer, 2009. "Functional income distribution and aggregate demand in the Euro area," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 33(1), pages 139-159, January.
- Taylor, Lance & O'Connell, Stephen A, 1985. "A Minsky Crisis," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(5), pages 871-85, Supp..
- Chiarella,Carl & Flaschel,Peter, 2000.
"The Dynamics of Keynesian Monetary Growth,"
Cambridge University Press, number 9780521643511, 9.
- Chiarella,Carl & Flaschel,Peter, 2011. "The Dynamics of Keynesian Monetary Growth," Cambridge Books, Cambridge University Press, number 9780521180184, 9.
- Chiarella, Carl & Flaschel, Peter & Wells, Graeme, 2003. "The Dynamics Of Keynesian Monetary Growth," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 7(03), pages 473-475, June.
- Day, R. & Huang, W., 1988.
"Bulls, Bears And Market Sheep,"
m8822, Southern California - Department of Economics.
- Peter Skott & Soon Ryoo, 2008. "Macroeconomic implications of financialisation," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 32(6), pages 827-862, November.
- Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 1(1), pages 15-29, February.
- L. Randall Wray, 2009. "Money Manager Capitalism and the Global Financial Crisis," Economics Working Paper Archive wp_578, Levy Economics Institute.
- Zeeman, E. C., 1974. "On the unstable behaviour of stock exchanges," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 39-49, March.
- Eugenio Caverzasi, 2012. "From the Financial Instability Hypothesis to the theory of Capital Market Inflation: a structural interpretation of the sub-prime crisis," DEM Working Papers Series 018, University of Pavia, Department of Economics and Management.
- Thomas Goda, 2013. "The role of income inequality in crisis theories and in the subprime crisis," Working Papers PKWP1305, Post Keynesian Economics Study Group (PKSG).
- Eugenio Caverzasi & Antoine Godin, 2013. "Stock-flow Consistent Modeling through the Ages," Economics Working Paper Archive wp_745, Levy Economics Institute.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.