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Financial frictions and crises in a Minskyan perspective

Author

Listed:
  • Giancarlo Bertocco
  • Andrea Kalajzić

Abstract

The concept of financial frictions is at the core of the Financial Friction Approach (FFA) which underlines that to explain the financial crisis of 2007-2008 it is sufficient to add the financial system to the New Keynesian DSGE model. Many economists have cited Minsky among those who “emphasized the importance of financial frictions.” The aim of this work is: i) to show that Minsky cannot be considered the precursor of the FFA and that FFA does not allow for a solid explanation of financial crises; ii) to present a sound explanation of the financial instability affecting capitalist economies based on two teachings characterizing Minsky’s work. The first consists in Minsky’s interpretation of Keynes’s General Theory, which recovers the revolutionary elements of Keynes’s thought neglected by the Neoclassical Synthesis. The second teaching consists in underlining the need to integrate Keynes’s and Schumpeter’s theoretical frameworks.

Suggested Citation

  • Giancarlo Bertocco & Andrea Kalajzić, 2022. "Financial frictions and crises in a Minskyan perspective," STOREPapers 1_2022, Associazione Italiana per la Storia dell'Economia Politica - StorEP.
    • Handle: RePEc:hpo:wpaper:1_2022
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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