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A Theory of Minsky Super-Cycles and Financial Crises

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  • Thomas I. Palley

    ()
    (Economics for Democratic & Open Societies, Washington DC)

Abstract

This paper argues that Hyman Minsky's financial instability hypothesis weaves together a medium term Keynesian approach to the business cycles in the spirit of Samuelson (1936) and Hicks (1950) with long cycle thinking of economists such as Schumpeter (1939) and Kondratieff. Post Keynesians have devoted considerable attention to the medium term dimension of Minsky's thinking. The current paper concentrates on the long swing dimension and introduces the idea of "Minsky super-cycles." It is the supercycle that ultimately permits financial crisis. Whereas financially driven business cycles occur every decade, financial crises occur over longer durations reflecting the longer phase of the super-cycle.

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Bibliographic Info

Paper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 05-2009.

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Length: 32 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:imk:wpaper:5-2009

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Keywords: Minsky; business cycles; financial instability hypothesis;

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References

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  1. Simon G. Gilchrist & Ben Bernanke & Mark Gertler, 1994. "The financial accelerator and the flight to quality," Finance and Economics Discussion Series 94-18, Board of Governors of the Federal Reserve System (U.S.).
  2. Mark Setterfield, 1997. "Should Economists Dispense with the Notion of Equilibrium?," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 20(1), pages 47-76, October.
  3. Hyman P. Minsky, 1992. "The Financial Instability Hypothesis," Economics Working Paper Archive wp_74, Levy Economics Institute.
  4. Domenico Delli Gatti & Mauro Gallegati & Hyman P. Minsky, 1994. "Financial Institutions, Economic Policy, and the Dynamic Behavior of the Economy," Economics Working Paper Archive wp_126, Levy Economics Institute.
  5. Foley, Duncan K., 1987. "Liquidity-profit rate cycles in a capitalist economy," Journal of Economic Behavior & Organization, Elsevier, vol. 8(3), pages 363-376, September.
  6. Ferri, Piero & Minsky, Hyman P., 1992. "Market processes and thwarting systems," Structural Change and Economic Dynamics, Elsevier, vol. 3(1), pages 79-91, June.
  7. Paul Davidson, 1991. "Is Probability Theory Relevant for Uncertainty? A Post Keynesian Perspective," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 129-143, Winter.
  8. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  9. L. Randall Wray, 2008. "Financial Markets Meltdown: What Can We Learn from Minsky," Economics Public Policy Brief Archive ppb_94, Levy Economics Institute.
  10. David Dequech, 1999. "Expectations and Confidence under Uncertainty," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 21(3), pages 415-430, April.
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Cited by:
  1. 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.
  2. Dan OLTEANU, 2011. "A Survey On The Drivers And Mechanisms Of Financial Crises," Romanian Journal of Economics, Institute of National Economy, vol. 33(2(bis)(42), pages 73-100, December.

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