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Financialisation and the sub-prime crisis: a stock-flow consistent model

Author

Listed:
  • Eugenio Caverzasi

    (Marche Polytechnic University, Ancona, Italy)

  • Antoine Godin

    (Kemmy Business School, University of Limerick, Republic of Ireland)

Abstract

Our opinion is that the so-called sub-prime mortgage crisis has been a structural crisis of the US's financial capitalism. In analysing the complex combination of factors that led to those events, we try not to focus on the most contingent aspects but to clarify the underlying structure that made the crisis endogenously emerge from the US's economic system. To reach this goal, we base our analysis on existing economic theories. In particular, the combination of the Financial Instability Hypothesis by Hyman Minsky, the theory of Capital Market Inflation by Jan Toporowski, and the post-Keynesian literature on financialisation represent the foundation of our analysis. The results of our analysis will then be reproduced through a simulated stock-flow consistent model to test their logical coherence.

Suggested Citation

  • Eugenio Caverzasi & Antoine Godin, 2015. "Financialisation and the sub-prime crisis: a stock-flow consistent model," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 12(1), pages 73-92, April.
    • Handle: RePEc:elg:ejeepi:v:12:y:2015:i:1:p73-92
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    Citations

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    Cited by:

    1. Greg Philip Hannsgen, 2021. "A Minimal Probabilistic Minsky Model: 3D Continuous-Jump Dynamics," Working Papers PKWP2026, Post Keynesian Economics Society (PKES).
    2. Karsten Kohler & Benjamin Tippet & Engelbert Stockhammer, 2023. "House price cycles, housing systems, and growth models," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 20(3), pages 461-490, December.
    3. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.
    4. Dafermos, Yannis & Nikolaidi, Maria, 2019. "Fiscal policy and ecological sustainability: a post-Keynesian perspective," Greenwich Papers in Political Economy 37777, University of Greenwich, Greenwich Political Economy Research Centre.
    5. Li, Boyao, 2022. "The macroeconomic effects of Basel III regulations with endogenous credit and money creation," MPRA Paper 113873, University Library of Munich, Germany.
    6. Yannis Dafermos & Maria Nikolaidi, 2019. "Fiscal policy and ecological sustainability," FMM Working Paper 52-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    7. Joana David Avritzer & Lídia Brochier, 2022. "Household credit-financed consumption and the debt service ratio: tackling endogenous autonomous demand in the Supermultiplier model," Working Papers PKWP2219, Post Keynesian Economics Society (PKES).
    8. Özgür Bayram SOYLU, 2020. "A simple model of developing countries: financing the current account deficit Abstract: A stock flow consistent model provides a monetary and financial framework to macroeconomics. It clearly shows th," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 11, pages 123-145, June.
    9. Malcolm Sawyer & Marco Veronese Passarella, 2017. "The Monetary Circuit in the Age of Financialisation: A Stock-Flow Consistent Model with A Twofold Banking Sector," Metroeconomica, Wiley Blackwell, vol. 68(2), pages 321-353, May.
    10. Ingrid Kvangraven & Carolina Alves, 2020. "¿Por qué tan hostil? Quebrando mitos sobre la economía heterodoxa," Ensayos de Economía 18314, Universidad Nacional de Colombia Sede Medellín.
    11. Greg Philip Hannsgen, 2021. "A Minimal Probabilistic Minsky Model: 3D Continuous-Jump Dynamics," Working Papers PKWP2102, Post Keynesian Economics Society (PKES).
    12. Di Bucchianico, Stefano, 2021. "Inequality, household debt, ageing and bubbles: A model of demand-side Secular Stagnation," IPE Working Papers 160/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    13. Joana David Avritzer, 2022. "Debt-led growth and its financial fragility: An investigation into the dynamics of a supermultiplier model," PSL Quarterly Review, Economia civile, vol. 75(302), pages 241-262.

    More about this item

    Keywords

    Minsky; stock-flow consistent; financialisation; banks;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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