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Profits, Confidence and public deficits: modeling Minsky's institutional dynamics

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Author Info

  • Eric Nasica

    ()
    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR6227 - Université de Nice Sophia-Antipolis)

  • Alain Raybaut

    ()
    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR6227 - Université de Nice Sophia-Antipolis)

Abstract

The aim of this paper is to present a “Minskian” model which explicitly deals with the influence of the institutional dynamics on the relation between finance, investment and economic fluctuations. First, the Minskian foundations of the proposed analytical framework are highlighted. Second the dynamical properties of the model are studied, drawing the inferences of a stabilization policy. It is shown that the economy is unstable when the budget policy is not very sensitive to variations in private investment. On the contrary, when, the counter cyclical deficit constraint is flexible enough, the economy is stabilized. These results, that echo recent debates and proposals on budget deficits rules in the EMU, are fully consistent with the way Minsky considers that public authorities may “stabilize an unstable economy”.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00465827.

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Date of creation: 2005
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Publication status: Published, Journal of Post Keynesian Economics, 2005, 28, 1, 136-154
Handle: RePEc:hal:journl:halshs-00465827

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00465827/en/
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Related research

Keywords: Minsky; financial instability; confidence; public deficits;

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Cited by:
  1. Chiarella Carl & Di Guilmi Corrado, 2012. "The Fiscal Cost of Financial Instability," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 16(4), pages 1-29, October.
  2. Soon Ryoo, 2009. "Long waves and short cycles in a model of endogenous financial fragility," UMASS Amherst Economics Working Papers 2009-03, University of Massachusetts Amherst, Department of Economics.

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