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The two-price model revisited. A Minskian-Kaleckian reading of the process of 'financialization'

  • Passarella, Marco

In Passarella (2011B) a kind of up-grading of Minsky’s economic thought was proposed, in which his ‘financial instability hypothesis’ was inter-bred with inputs from the current heterodox literature. This up-grading was done within a one-good model where capital goods were regarded as a mere portion of firms’ homogeneous output. This simplifying hypothesis did not permit us to include explicitly the ratio of the (demand) price of capital assets to the supply price of capital goods – i.e. the key analytical concept in Minsky’s theory. This paper aims to improve the simplified model provided in Passarella (2011B) by considering explicitly an artificial, pure credit, closed capitalist economy in which production firms are split into two different sectors. The result is a new, although paradoxical, monetary circuit model which allows us to retrieve some of the most disputed results of Minsky’s analysis of economic instability.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32033.

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Date of creation: 11 Jul 2011
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Handle: RePEc:pra:mprapa:32033
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  1. Brancaccio, Emiliano, 2008. "Solvency and Labour Effort in a Monetary Theory of Production," European Journal of Economic and Social Systems, Lavoisier, vol. 21(2), pages 195-211.
  2. Marco, Passarella, 2011. "Systemic financial fragility and the monetary circuit: a stock-flow consistent approach," MPRA Paper 28498, University Library of Munich, Germany.
  3. Soon Ryoo, 2009. "Long waves and short cycles in a model of endogenous financial fragility," UMASS Amherst Economics Working Papers 2009-03, University of Massachusetts Amherst, Department of Economics.
  4. Gennaro Zezza, 2004. "Some Simple, Consistent Models of the Monetary Circuit," Macroeconomics 0405006, EconWPA.
  5. Claudio H. Dos Santos & Gennaro Zezza, 2008. "A Simplified, 'Benchmark', Stock-Flow Consistent Post-Keynesian Growth Model," Metroeconomica, Wiley Blackwell, vol. 59(3), pages 441-478, 07.
  6. Riccardo Bellofiore & Joseph Halevi & Marco Passarella, 2010. "Minsky in the ‘New’ Capitalism: The New Clothes of the Financial Instability Hypothesis," Chapters, in: The Elgar Companion to Hyman Minsky, chapter 4 Edward Elgar Publishing.
  7. Marc Lavoie & Wynne Godley, 2000. "Kaleckian Models of Growth in a Stock-Flow Monetary Framework: A Neo-Kaldorian Model," Economics Working Paper Archive wp_302, Levy Economics Institute.
  8. Marco, Passarella, 2011. "A simplified stock-flow consistent dynamic model of the systemic financial fragility in the 'New Capitalism'," MPRA Paper 28499, University Library of Munich, Germany.
  9. Jan Toporowski, 2008. "Minsky's 'induced investment and business cycles'," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 725-737, September.
  10. Delli Gatti, Domenico & Gallegati, Mauro & Greenwald, Bruce & Russo, Alberto & Stiglitz, Joseph E., 2006. "Business fluctuations in a credit-network economy," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 370(1), pages 68-74.
  11. Wynne Goldey & Marc Lavoie, 2007. "Fiscal policy in a stock-flow consistent (SFC) model," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 30(1), pages 79-100, October.
  12. cavalieri, duccio, 2003. "On the closure of the monetary circuit," MPRA Paper 43836, University Library of Munich, Germany.
  13. Passarella Marco, 2010. "The Paradox of Tranquility Revisited. A Lotka-Volterra Model of the Financial Instability," Rivista italiana degli economisti, Società editrice il Mulino, issue 1, pages 69-104.
  14. Marc Lavoie & Mario Seccareccia, 2001. "Minsky's financial fragility hypothesis: a missing macroeconomic link?," Chapters, in: Financial Fragility and Investment in the Capitalist Economy, chapter 4 Edward Elgar Publishing.
  15. Godley, Wynne, 1999. "Money and Credit in a Keynesian Model of Income Determination," Cambridge Journal of Economics, Oxford University Press, vol. 23(4), pages 393-411, July.
  16. M. Ruth & K. Donaghy & P. Kirshen, 2006. "Introduction," Chapters, in: Regional Climate Change and Variability, chapter 1 Edward Elgar Publishing.
  17. Graziani,Augusto, 2003. "The Monetary Theory of Production," Cambridge Books, Cambridge University Press, number 9780521812115, September.
  18. Wynne Godley, 1999. "Seven Unsustainable Processes: Medium-Term Prospects and Policies for the United States and the World," Economics Strategic Analysis Archive 99-10, Levy Economics Institute.
  19. Hyman P. Minsky, 1992. "The Financial Instability Hypothesis," Economics Working Paper Archive wp_74, Levy Economics Institute.
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