Volume: 1 Issue: 1

Review of Keynesian Economics

Minsky cycles in Keynesian models of growth and distribution

Soon Ryoo * *

Keywords: Minsky cycles, financial instability, Kaleckian model, Kaldorian model


This paper provides an alternative formalization of Minsky's theory of financial instability and examines the conditions under which perpetual cycles emerge from endogenous changes in financial practices. The main features of our model are found in its emphasis on (1) the interaction between debt and portfolio dynamics, (2) the importance of margins of safety in the evolution of firms' indebtedness, and (3) the decisive role of the dynamics of capital gains and expectations in asset markets. The general framework of financial instability is combined with two Keynesian models of growth and distribution (Kaleckian vs Kaldorian).

Author Notes

Email: sryoo@adelphi.edu. I would like to thank Peter Skott for his useful suggestions for an early version of this paper and Tom Palley for his encouragement to submit this article. The usual caveat applies.

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