IDEAS home Printed from
   My bibliography  Save this article

Liquidity traps or Minsky crises: a critical review of the recent U.S. recession and Japan's Heisei recession in the 1990s


  • Peter C. Y. Chow
  • Kevin R. Foster


This paper reviews the Japanese growth recession from 1991 to 2001 and the recent U.S. financial crisis to determine the relevancy of the "liquidity trap" hypothesis (due originally to Keynes updated by Krugman) and a Minsky crisis hypothesis. To evaluate the Minsky hypothesis, we use the same data series that he used in his 1986 analysis and follow in his footsteps. These data clearly show increasing financial stress and fragility by 2005 in the United States. We find that elements of both hypotheses are useful in describing economic conditions and thus guiding policy choices. Current Fed policy in vastly expanding its balance sheet to support the financial sector is just the sort of policy that Minsky might have advocated.

Suggested Citation

  • Peter C. Y. Chow & Kevin R. Foster, 2010. "Liquidity traps or Minsky crises: a critical review of the recent U.S. recession and Japan's Heisei recession in the 1990s," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 32(4), pages 571-590, July.
  • Handle: RePEc:mes:postke:v:32:y:2010:i:4:p:571-590

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item


    financial crisis; liquidity trap; Minsky;


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:postke:v:32:y:2010:i:4:p:571-590. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.