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A Minskian extension to Kaleckian dynamics

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  • Kemp-Benedict, Eric

Abstract

Minsky’s financial instability hypothesis (FIH) has been criticized as suffering from a fallacy of composition that violates a central thesis of Kalecki. Nevertheless, Minsky’s description of borrowing and lending behavior is sufficiently compelling that it continues to drive new research. In this paper we propose a modified Kaleckian model in which a behavioral rule captures Minsky’s microeconomic argument that firms and banks increase the leverage of new loans during booms, but which translates through Kaleckian dynamics into a falling debt-to-capital ratio at a macroeconomic level. The expanding loan-to-capital ratio drives a potential instability, but in utilization, rather than debt.

Suggested Citation

  • Kemp-Benedict, Eric, 2015. "A Minskian extension to Kaleckian dynamics," MPRA Paper 65186, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:65186
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    References listed on IDEAS

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    1. Eckhard Hein, 2007. "Interest Rate, Debt, Distribution And Capital Accumulation In A Post‐Kaleckian Model," Metroeconomica, Wiley Blackwell, vol. 58(2), pages 310-339, May.
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    6. Marc Lavoie & Mario Seccareccia, 2001. "Minsky's financial fragility hypothesis: a missing macroeconomic link?," Chapters, in: Riccardo Bellofiore & Piero Ferri (ed.), Financial Fragility and Investment in the Capitalist Economy, chapter 4, Edward Elgar Publishing.
    7. M. J. Gordon, 1992. "The Neoclassical and a Post Keynesian Theory of Investment," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 14(4), pages 425-443, July.
    8. Sudipto Bhattacharya, 1979. "Imperfect Information, Dividend Policy, and "The Bird in the Hand" Fallacy," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 259-270, Spring.
    9. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411-411.
    10. Jan Toporowski, 2008. "Minsky's 'induced investment and business cycles'," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(5), pages 725-737, September.
    11. Soon Ryoo, 2013. "The Paradox Of Debt And Minsky'S Financial Instability Hypothesis," Metroeconomica, Wiley Blackwell, vol. 64(1), pages 1-24, February.
    12. M. C. Findlay & E. E. Williams, 2000. "A Fresh Look at the Efficient Market Hypothesis: How the Intellectual History of Finance Encouraged a Real “Fraud-on-The-Market”," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 23(2), pages 181-199, December.
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    More about this item

    Keywords

    financial instability hypothesis; Kalecki; Minsky; debt dynamics;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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