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When Two Minskyan Processes Meet a Large Shock: The Economic Implications of the Pandemic

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  • Michalis Nikiforos

Abstract

The spread of the new coronavirus (COVID-19) is a major shock for the US and global economies. Research Scholar Michalis Nikiforos explains that we cannot fully understand the economic implications of the pandemic without reference to two Minskyan processes at play in the US economy: the growing divergence of stock market prices from output prices, and the increasing fragility in corporate balance sheets. The pandemic did not arrive in the context of an otherwise healthy US economy--the demand and supply dimensions of the shock have aggravated an inevitable adjustment process. Using a Minskyan framework, we can understand how the current economic weakness can be perpetuated through feedback effects between flows of demand and supply and their balance sheet impacts.

Suggested Citation

  • Michalis Nikiforos, 2020. "When Two Minskyan Processes Meet a Large Shock: The Economic Implications of the Pandemic," Economics Policy Note Archive 20-1, Levy Economics Institute.
    • Handle: RePEc:lev:levypn:20-1
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    1. Ryan Niladri Banerjee & Boris Hofmann, 2018. "The rise of zombie firms: causes and consequences," BIS Quarterly Review, Bank for International Settlements, September.
    2. Müge Adalet McGowan & Dan Andrews & Valentine Millot & Thorsten BeckManaging Editor, 2018. "The walking dead? Zombie firms and productivity performance in OECD countries," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 33(96), pages 685-736.
    3. Michalis Nikiforos & Gennaro Zezza, 2018. "'America First,' Fiscal Policy, and Financial Stability," Economics Strategic Analysis Archive sa_apr_18, Levy Economics Institute.
    4. Hyman P. Minsky, 1992. "The Financial Instability Hypothesis," Economics Working Paper Archive wp_74, Levy Economics Institute.
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    Cited by:

    1. Sabeeh Ullah, 2023. "Impact of COVID-19 Pandemic on Financial Markets: a Global Perspective," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(2), pages 982-1003, June.
    2. Julia M. Puaschunder, 2020. "Social Volatility and Temporal Foci as Accelerators of Economic Trends," Proceedings of the 20th International RAIS Conference, December 6-7, 2020 016jpm, Research Association for Interdisciplinary Studies.
    3. Provash Kumer SARKER, 2020. "Covid crisis: Fiscal, monetary and macro-financial policy responses," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(624), A), pages 41-54, Autumn.
    4. Alessandra Cornaro, 2023. "Financial resilience of insurance network during Covid-19 pandemic," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(2), pages 151-172, December.

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