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Hyman Minsky’s Financial Instability Hypothesis and the Accounting Structure of Economy

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  • Biondi Yuri

    (Cnrs – ESCP Europe, 79, avenue de la Republique, Paris 75011, France)

Abstract

Hyman Minsky’s view of the accounting structure of economy is essentially based upon ownership of wealth, cash flows and financial instruments as entitlements to both. Further accounting notions are introduced here that improve on Minsky’s financial analysis. From the accounting viewpoint, revenues and expenses, assets and liabilities are organized through economic entities that frame and shape cash transfers through an accruals basis of accounting. Including these ongoing entities and their accruals upgrades Minsky’s frame of analysis from both heuristic and theoretical viewpoints. Current international and US accounting standards and practices provide examples concerning leases, repos, special purpose entities, goodwill, depreciation and liquidation values, and mark-to-market valuation of corporate liabilities. Notably, banking and government agencies can then be understood as dynamic holistic connections that layer upon ownership of wealth and entitlements to it, generating a credit-debt economy that fundamentally differs from a “capitalist” economy. Among others, Schumpeter and Keynes originate this collective dynamic understanding of bank borrowing and government borrowing, respectively. Both borrowings can be and have been employed to generate investment, production and consumption that could not have been generated without them. Some implications for economic theory and analysis of financial stability, banking and money are developed.

Suggested Citation

  • Biondi Yuri, 2013. "Hyman Minsky’s Financial Instability Hypothesis and the Accounting Structure of Economy," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 3(3), pages 141-166, June.
  • Handle: RePEc:bpj:aelcon:v:3:y:2013:i:3:p:141-166:n:8
    DOI: 10.1515/ael-2013-0045
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    Cited by:

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    4. Pascal Seppecher & Isabelle Salle, 2015. "Deleveraging crises and deep recessions: a behavioural approach," Applied Economics, Taylor & Francis Journals, vol. 47(34-35), pages 3771-3790, July.
    5. Colin Haslam & Nick Tsitsianis, 2015. "Financialized Accounting: Capitalization and leveraging the intangible," Working Papers 58, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
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    7. Haslam Colin & Tsitsianis Nick & Hoinaru Razvan & Andersson Tord & Katechos George, 2016. "Stress Testing International Financial Reporting Standards (IFRS): Accounting for Stability and the Public Good in a Financialized World," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 6(2), pages 93-118, July.
    8. Pascal Seppecher & Isabelle Salle, 2015. "Deleveraging crises and deep recessions: a behavioural approach," Applied Economics, Taylor & Francis Journals, vol. 47(34-35), pages 3771-3790, July.

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