It happened again: A Minskian analysis of the subprime loan crisis
The advanced countries are now going through the worst crisis since the Depression, but today's dominant current theories and econometric models proved unable to predict the crisis. The paper investigates whether the financial instability hypothesis of Hyman P. Minsky offers a better explanation. Minsky argued that in a period of economic growth and tranquility economic agents are more prone to take risk, and banks are more willing to finance borrowers. Meanwhile, in the course of the boom over-indebtedness and financial innovations make the financial system more fragile, and more exposed to adverse effects. We show that both these effects made themselves felt in the subprime loan crisis. Specifically, the main determinants of the crisis have been the increasing appetite for risk and financial innovations. So, we conclude that, although this crisis differs in some of its features from previous crashes and from Minsky's account, the mechanisms underscored by Minsky were and are nevertheless at work.
Year of publication: |
2011
|
---|---|
Authors: | Silipo, Damiano B. |
Published in: |
Journal of Economics and Business. - Elsevier, ISSN 0148-6195. - Vol. 63.2011, 5, p. 441-455
|
Publisher: |
Elsevier |
Keywords: | Subprime loans crisis Financial instability hyphothesis Determinants of the boom and bust Minskian analysis |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Incentives and forms of cooperation in research and development
Silipo, Damiano Bruno, (2008)
-
The effects of screening and monitoring on credit rationing of SMEs
Agostino, Mariarosaria, (2008)
-
Agostino, Mariarosaria, (2009)
- More ...