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Minsky and the Subprime Mortgage Crisis: The Financial Instability Hypothesis in the Era of Financialization

Levy Economics Institute, Working Paper No. 796

24 Pages Posted: 30 Apr 2014

See all articles by Eugenio Caverzasi

Eugenio Caverzasi

Department of Economic and Social Sciences, Marche Polytechnic University, Ancona; University of Limerick

Date Written: April 28, 2014

Abstract

The aim of this paper is to develop a structural explanation of the subprime mortgage crisis, grounded on the combination of two apparently incompatible financial theories: the financial instability hypothesis by Hyman P. Minsky and the theory of capital market inflation by Jan Toporowski. Our thesis is that, once the evolution of the financial market is taken into account, the financial Keynesianism of Minsky is still a valid framework to understand the events leading to the crisis.

Keywords: Hyman Minsky, Financial Instability Hypothesis, Jan Toporowski, Capital Market Inflation, Financialization, Financial Crisis, Subprime Mortgage Crisis

JEL Classification: B2, B5, E44, G01

Suggested Citation

Caverzasi, Eugenio, Minsky and the Subprime Mortgage Crisis: The Financial Instability Hypothesis in the Era of Financialization (April 28, 2014). Levy Economics Institute, Working Paper No. 796, Available at SSRN: https://ssrn.com/abstract=2430259 or http://dx.doi.org/10.2139/ssrn.2430259

Eugenio Caverzasi (Contact Author)

Department of Economic and Social Sciences, Marche Polytechnic University, Ancona ( email )

Piazzale Martelli 8
Ancona, 18039
Italy

University of Limerick ( email )

Limerick
Ireland

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