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Minsky and the Subprime Mortgage Crisis: The Financial Instability Hypothesis in the Era of Financialization

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  • Eugenio Caverzasi
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    Abstract

    The aim of this paper is to develop a structural explanation of the subprime mortgage crisis, grounded on the combination of two apparently incompatible financial theories: the financial instability hypothesis by Hyman P. Minsky and the theory of capital market inflation by Jan Toporowski. Our thesis is that, once the evolution of the financial market is taken into account, the financial Keynesianism of Minsky is still a valid framework to understand the events leading to the crisis.

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    File URL: http://www.levyinstitute.org/pubs/wp_796.pdf
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    Bibliographic Info

    Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_796.

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    Date of creation: Apr 2014
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    Handle: RePEc:lev:wrkpap:wp_796

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    Related research

    Keywords: Hyman Minsky; Financial Instability Hypothesis; Jan Toporowski; Capital Market Inflation; Financialization; Financial Crisis; Subprime Mortgage Crisis;

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    1. Özgür Orhangazi, 2007. "Financialization and Capital Accumulation in the Non-Financial Corporate Sector," Working Papers wp149, Political Economy Research Institute, University of Massachusetts at Amherst.
    2. Till van Treeck, 2009. "A synthetic, stock--flow consistent macroeconomic model of 'financialisation'," Cambridge Journal of Economics, Oxford University Press, vol. 33(3), pages 467-493, May.
    3. Dimitri B. Papadimitriou & L. Randall Wray, 1998. "The Economic Contributions of Hyman Minsky: Varieties of Capitalism and Institutional Reform," Macroeconomics 9802018, EconWPA.
    4. Domenico Delli Gatti & Mauro Gallegati & Hyman P. Minsky, 1999. "Financial Institutions, Economic Policy, and the Dynamic Behavior of the Economy," Macroeconomics 9903009, EconWPA.
    5. Gary A. Dymski, 2010. "Why the subprime crisis is different: a Minskyian approach," Cambridge Journal of Economics, Oxford University Press, vol. 34(2), pages 239-255, March.
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