Profits, Confidence and public deficits: modeling Minsky's institutional dynamics
AbstractThe 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 InfoPaper provided by HAL in its series Post-Print with number halshs-00465827.
Date of creation: 2005
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Publication status: Published, Journal of Post Keynesian Economics, 2005, 28, 1, 136-154
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Minsky; financial instability; confidence; public deficits;
Other versions of this item:
- Eric Nasica & Alain Raybaut, 2005. "Profits, confidence, and public deficits: modeling Minsky's institutional dynamics," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 28(1), pages 136-154, November.
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