Financial Fragility in the Current European crisis
AbstractThe paper argues that the European financial system in the years following the great financial crisis started in 2007 has become increasingly fragile. Minsky’s notion of fragility, on which it is based, is related to history, policy and institutions. In the current European environment, fragility depends on the rise of shadow banks’ assets, the expansion of derivatives and the changes in financial regulation. All these elements have jointly triggered several feedback loops. In Minsky’s opinion, policies should have the scope of thwarting self-enforcing feedback loops. Yet the policies that have been implemented so far seem to have produced the opposite effects. They have created new feedback loops that nurture fragility again. This outcome, however, is not surprising for policies may change initial conditions and have unintended consequences, as Minsky has taught us since a long time.
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Bibliographic InfoPaper provided by Department of International Politics, City University London in its series CITYPERC Working Paper Series with number 2013-09.
Date of creation: 2013
Date of revision:
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Postal: Department of International Politics, Social Sciences Building, City University London, Whiskin Street, London, EC1R 0JD, United Kingdom
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More information through EDIRC
financial fragility; Minsky; European financial system; feedback loops; regulation; thwarting policies;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-23 (All new papers)
- NEP-CBA-2013-03-23 (Central Banking)
- NEP-PKE-2013-03-23 (Post Keynesian Economics)
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