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From the Financial Instability Hypothesis to the theory of Capital Market Inflation: a structural interpretation of the sub-prime crisis

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  • Eugenio Caverzasi

    (Department of Economics and Management, University of Pavia)

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. The theoretical analysis - presented in the first part of the paper - will then be reproduced in a Stock Flow Consistent model, to test its coherence, both logical and with respect to stylized facts in the U.S. economy.

Suggested Citation

  • Eugenio Caverzasi, 2012. "From the Financial Instability Hypothesis to the theory of Capital Market Inflation: a structural interpretation of the sub-prime crisis," DEM Working Papers Series 018, University of Pavia, Department of Economics and Management.
    • Handle: RePEc:pav:demwpp:018
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