Financial instability and functional finance : a Lerner-Minsky perspective
In the wake of the 2007/08 financial crisis, massive public interventions in markets that sought to mitigate the subsequent depression have resulted in huge deficits without being able to calm down the nervousness of markets and the rise of unemployment. A counterproductive dilemma then came into the picture through the opposition between deficit creating reflationary policies and conservative budgetary policies. The “original sin” of such a debate lies in the implicit assumption that active public spending is harmful to economic activity at long run without providing consistent analysis of the malfunctioning of financialized and weakened economies. This paper suggests another alternative by bringing together functional finance of Abba Lerner and financial instability hypothesis of Hyman Minsky in order to state the principles of an alternative macroeconomic stabilization framework able to prevent disequilibria-fuelling speculative finance and to sustain job-creating productive activities.
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|Date of creation:||2014|
|Publication status:|| Published in Mamica, L., Tridico, P. Economic policy and the financial crisis, Routledge, pp.148-162, 2014, |
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01113534|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
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- L. Randall Wray, 2009.
"An Alternative View of Finance, Saving, Deficits, and Liquidity,"
International Journal of Political Economy,
M.E. Sharpe, Inc., vol. 38(4), pages 25-43, December.
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- Mathew Forstater, 1999. "Functional Finance and Full Employment: Lessons from Lerner for Today," Macroeconomics 9908002, EconWPA. Full references (including those not matched with items on IDEAS)
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