Systemic Financial Fragility And The Monetary Circuit: A Stock-flow Consistent Approach

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Executive Summary

In the last few years, a number of scholars have referred to the crop of contributions of Hyman P. Minsky as required readings to understanding the tendency of the capitalist economies to fall into recurring crises. The so-called 'Financial instability hypothesis' of Minsky relies, however, on much disputed assumptions. Moreover, Minsky's analysis of capitalism must be updated on the basis of the deep changes which, during the last three decades, have concerned the world economy. The authors analyze the impact of both capital-asset inflation and consumer credit on the financial 'Soundness' of the economy, within a simplified stock-flow consistent monetary circuit model.

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