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An empirical analysis of Minsky regimes in the US economy

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  • Leila E. Davis - Joao Paulo A. de Souza y Gonzalo Hernandez

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  • Joao Paulo A. de Souza

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  • Gonzalo Hernandez

    ()

Abstract

In this paper we analyze Minskian dynamics in the US economy via an empirical application of Minsky's nancing regime classi cations to a panel of non nancial corporations. First, we map Minsky's de nitions of hedge, speculative and Ponzi nance onto rm-level data to describe the evolution of Minskian regimes. We highlight striking growth in the share of Ponzi rms in the post-1970 US, concentrated among small corporations. This secular growth in the incidence of Ponzi rms is consistent with the possibility of a long wave of increasingly fragile nance in the US economy. Second, we explore the possibility of short-run Minskian dynamics at a business-cycle frequency. Using linear probability models relating rms' probability of being Ponzi to the aggregate output gap, which captures short-term macroeconomic uctuations exogenous to individual rms, we nd that aggregate downturns are correlated with an almost zero increased probability that rms are Ponzi. This result is corroborated by quantile regressions using a continuous measure of nancial fragility, the interest coverage ratio, which identify almost zero effects of short-term uctuations on nancial fragility across the interest coverage distribution. Together, these results speak to an important question in the theoretical literature on nancial fragility regarding the duration of Minskian cycles, and lend support, in particular, to the contention that Minskian dynamics may take the form of long waves, but do not operate at business cycle frequencies.

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  • 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.
  • Handle: RePEc:col:000416:015495
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    Cited by:

    1. Maria Nikolaidi & Engelbert Stockhammer, 2017. "Minsky Models: A Structured Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1304-1331, December.
    2. Engelbert Stockhammer & Joel Rabinovich & Niall Reddy, 2018. "Distribution, wealth and demand regimes in historical perspective," FMM Working Paper 14-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    3. Hiroshi Nishi, 2016. "An empirical contribution to Minsky’s financial fragility:Evidence from non-financial sectors in Japan," Discussion papers e-16-007, Graduate School of Economics , Kyoto University.
    4. Esteban Pérez Caldentey, Nicole Favreau-Negront, and Luis Méndez Lobos, 2018. "Corporate Debt in Latin America and its Macroeconomic Implications," Economics Working Paper Archive wp_904, Levy Economics Institute.
    5. Stockhammer, Engelbert & Rabinovich, Joel & Reddy, Niall, 2017. "Distribution, wealth and demand regimes in historical perspective. USA, UK, France and Germany, 1855-2010," Economics Discussion Papers 2017-5, School of Economics, Kingston University London.
    6. Ernani Teixeira Torres Filho & Norberto Montani Martins & Caroline Yukari Miaguti, 2017. "Minsky's Financial Fragility: An Empirical Analysis of Electricity Distribution Companies in Brazil (2007-15)," Economics Working Paper Archive wp_896, Levy Economics Institute.

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    Keywords

    Minsky cycles; nancial fragility; rm behavior;

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