Minsky: Economic Cycle, Financial Instability, and Economic Policy

Abstract

Until the end of 2019, a little before the effects of COVID-19 would be felt globally, the world’s most developed capitalist economies did not show signs of recovery, on the contrary, it seemed that their destiny was a new recession. As is well known, after the 2007 crisis that began in the United States, the institutional and economic policy proposals of Hyman Minsky have been reexamined in a different context. In this paper, we make a description and an interpretation of the main Minskian proposals, which have been reexamined in order to explain the economic cycle, as well as the economic crises and economic policies. Minsky considered that financial instability is inherent to the capitalist system itself, because for him the very stability of the system is in itself destabilizing. It is important to understand the proposals of the Minskian approach, as it is an interesting and valuable contribution to the prevailing conventional theory that failed to foresee the recessionary problems or the economic crisis of the first decade of this century.