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Orthodox versus Heterodox (Minskyan) Perspectives of Financial Crises: Explosion in the 1990s versus Implosion in the 2000s

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  • Jesus Munoz

Abstract

Orthodox and heterodox theories of financial crises are hereby compared from a theoretical viewpoint, with emphasis on their genesis. The former view (represented by the fourth-generation models of Paul Krugman) reflects the neoclassical vision whereby turbulence is an exception; the latter insight (represented by the theories of Hyman P. Minsky) validates and extends John Maynard Keynes's vision, since it is related to a modern financial world. The result of this theoretical exercise is that Minsky's vision represents a superior explanation of financial crises and current events in financial systems because it considers the causes of financial crises as endogenous to the system. Crucial facts in relevant financial crises are mentioned in section 1, as an introduction; the orthodox models of financial crises are described in section 2; the heterodox models of financial crises are outlined in section 3; the main similarities and differences between orthodox and heterodox models of financial crises are identified in section 4; and conclusions based on the information provided by the previous section are outlined in section 5. References are listed at the end of the paper.

Suggested Citation

  • Jesus Munoz, 2011. "Orthodox versus Heterodox (Minskyan) Perspectives of Financial Crises: Explosion in the 1990s versus Implosion in the 2000s," Economics Working Paper Archive wp_695, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_695
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    Cited by:

    1. Thomas Goda, 2013. "The role of income inequality in crisis theories and in the subprime crisis," Working Papers PKWP1305, Post Keynesian Economics Society (PKES).
    2. Thomas Goda, 2017. "A comparative review of the role of income inequality in economic crisis theories and its contribution to the financial crisis of 2007-2009," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 9(1), pages 151-174, February.

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    More about this item

    Keywords

    John Maynard Keynes; Hyman P. Minsky; Paul Krugman; Financial Crises; Financial Fragility; Asset Bubbles; Speculation;
    All these keywords.

    JEL classification:

    • B00 - Schools of Economic Thought and Methodology - - General - - - History of Economic Thought, Methodology, and Heterodox Approaches
    • B20 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - General
    • B30 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - General
    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • E0 - Macroeconomics and Monetary Economics - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F0 - International Economics - - General
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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