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Evolutionary finance and central banking

Author

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  • Giorgos Argitis

Abstract

This article considers Minsky’s contribution to evolutionary economics, paying attention to his concepts of evolutionary finance and central banking. Evolutionary finance is defined by Minsky as the process through which changes in effective demand, uncertainty and cash flows trigger solvency and liquidity risk that increase financial fragility and the possibility of financial instability and debt deflation. Emphasis is placed on the role of Ponzi position making operations and failed margins of safety in inducing low-quality leverage and liability structures. Evolutionary central banking is defined by Minsky as the process that central banks use by applying qualitative monetary policy through discount window procedures and lender-of-last-resort interventions to target Ponzi leverage structures and financial stability. Evolutionary central banking provides operational guidelines and objectives that help us understand the monetary policies adopted by central banks after the Global Financial Crisis of 2007–2008, as well as the limitations of the non-conventional monetary policies.

Suggested Citation

  • Giorgos Argitis, 2017. "Evolutionary finance and central banking," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 41(3), pages 961-976.
    • Handle: RePEc:oup:cambje:v:41:y:2017:i:3:p:961-976.
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    File URL: http://hdl.handle.net/10.1093/cje/bew058
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    Citations

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    Cited by:

    1. Thomas Holtfort, 2019. "From standard to evolutionary finance: a literature survey," Management Review Quarterly, Springer, vol. 69(2), pages 207-232, June.
    2. Jakob Vestergaard & Daniela Gabor, 2021. "Central Banks Caught Between Market Liquidity and Fiscal Disciplining: A Money View Perspective on Collateral Policy," Working Papers Series inetwp170, Institute for New Economic Thinking.
    3. Eduard IONESCU & Octav NEGURITA, 2017. "The Evolution of Refinancing Loans Sector within the Economic Growth," International Conference on Economic Sciences and Business Administration, Spiru Haret University, vol. 4(1), pages 212-219, November.
    4. Yannis Dafermos & Daniela Gabor & Jo Michell, 2023. "Institutional supercycles: an evolutionary macro-finance approach," New Political Economy, Taylor & Francis Journals, vol. 28(5), pages 693-712, September.

    More about this item

    Keywords

    Evolutionary finance; Solvency; liquidity; Financial fragility; Evolutionary central banking;
    All these keywords.

    JEL classification:

    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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