Year: 2017
Type: article
Abstract: We examine to what extent the Keen model (Keen 1995) is a faithful modelling of Minsky's financial instability hypothesis. We focus on debt, money, and debt-induced crisis. We propose a clear interpretation of the debt: households lend unconsumed income to firms to finance their investments, and money creation is not necessary. We offer a detailed description of the economic collapse and analyse its causes thanks to numerical experiments. The crisis is triggered by profits squeezed by wages and not by debt overhang. We test alternative assumptions on the investors’ behaviour to show that behaviour at very low profits is fundamental. We conclude that the Keen crisis has few Minskyan flavours.
Source: Review of Keynesian Economics
Authors: Antonin Pottier, Adrien Nguyen-Huu
Institutions: Centre National de la Recherche Scientifique, Université Paris Sciences et Lettres, Centre d’Économie et de Décision Publique (CEDP), Institut Interdisciplinaire de l'Innovation, École Nationale Supérieure des Mines de Paris, Université de Montpellier, Institut Agro Montpellier, Institut National de Recherche pour l'Agriculture, l'Alimentation et l'Environnement, Laboratoire Montpelliérain d’Economie Théorique et Appliquée
Language: English
Topic: Economic Theory and Policy
Domain: Social Sciences
Open Access status: hybrid
Funder: Agence Nationale de la Recherche
OpenAlex ID: W2549337016