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Minsky cycles in Keynesian models of growth and distribution

Author

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  • Soon Ryoo

    (Adelphi University)

Abstract

his paper provides an alternative formalization of Minsky's theory of financial instability and examines the conditions under which perpetual cycles emerge from endogenous changes in financial practices. The main features of our model are found in its emphasis on (1) the interaction between debt and portfolio dynamics, (2) the importance of margins of safety in the evolution of firms' indebtedness, and (3) the decisive role of the dynamics of capital gains and expectations in asset markets. The general framework of financial instability is combined with two Keynesian models of growth and distribution (Kaleckian vs Kaldorian).

Suggested Citation

  • Soon Ryoo, 2013. "Minsky cycles in Keynesian models of growth and distribution," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(1), pages 37-60, January.
  • Handle: RePEc:elg:rokejn:v:1:y:2013:i:1:p37-60
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    References listed on IDEAS

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    1. Brock, William A. & Hommes, Cars H., 1998. "Heterogeneous beliefs and routes to chaos in a simple asset pricing model," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1235-1274, August.
    2. Alan G. Isaac & Yun K. Kim, 2013. "Consumer and Corporate Debt: A Neo- K aleckian Synthesis," Metroeconomica, Wiley Blackwell, vol. 64(2), pages 244-271, May.
    3. Matthieu Charpe & Peter Flaschel & Christian Proano & Willi Semmler, 2009. "Overconsumption, credit rationing and bailout monetary policy: A Minskyan perspective," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 6(2), pages 247-270.
    4. Skott,Peter, 2008. "Conflict and Effective Demand in Economic Growth," Cambridge Books, Cambridge University Press, number 9780521066310, October.
    5. Peter Skott & Soon Ryoo, 2008. "Macroeconomic implications of financialisation," Cambridge Journal of Economics, Oxford University Press, vol. 32(6), pages 827-862, November.
    6. Nicholas Kaldor, 1955. "Alternative Theories of Distribution," Review of Economic Studies, Oxford University Press, vol. 23(2), pages 83-100.
    7. Thomas I. Palley, 1994. "Debt, Aggregate Demand, and The Business Cycle: an Analysis in the Spirit of Kaldor and Minsky," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 16(3), pages 371-390, March.
    8. Peter Skott & Ben Zipperer, 2012. "An empirical evaluation of three post-Keynesian models," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 9(2), pages 277-307.
    9. Carl Chiarella, 1992. "The Dynamics of Speculative Behaviour," Working Paper Series 13, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    10. Soon Ryoo, 2013. "The Paradox Of Debt And Minsky'S Financial Instability Hypothesis," Metroeconomica, Wiley Blackwell, vol. 64(1), pages 1-24, February.
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    Citations

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    Cited by:

    1. Soon Ryoo, 2016. "Inequality of Income and Wealth in the Long Run: A Kaldorian Perspective," Metroeconomica, Wiley Blackwell, vol. 67(2), pages 429-457, May.
    2. Eugenio Caverzasi & Alberto Russo, 2018. "Toward a new microfounded macroeconomics in the wake of the crisis," Working Papers PKWP1807, Post Keynesian Economics Society (PKES).
    3. Soon Ryoo, 2016. "Household debt and housing bubbles: a Minskian approach to boom-bust cycles," Journal of Evolutionary Economics, Springer, vol. 26(5), pages 971-1006, December.
    4. Yannis Dafermos, 2015. "Debt cycles, instability and fiscal rules: a Godley-Minsky model," Working Papers 20151509, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    5. Adam B. Barrett, 2017. "Stability of zero-growth economics analysed with a Minskyan model," Papers 1704.08161, arXiv.org, revised Nov 2017.
    6. Engelbert Stockhammer & Rafael Wildauer, 2016. "Debt-driven growth? Wealth, distribution and demand in OECD countries," Cambridge Journal of Economics, Oxford University Press, vol. 40(6), pages 1609-1634.
    7. Leila E. Davis - Joao Paulo A. de Souza y Gonzalo Hernandez & Joao Paulo A. de Souza & Gonzalo Hernandez, 2017. "An empirical analysis of Minsky regimes in the US economy," VNIVERSITAS ECONÓMICA 015495, UNIVERSIDAD JAVERIANA - BOGOTÁ.

    More about this item

    Keywords

    Minsky cycles; financial instability; Kaleckian model; Kaldorian model;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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