An empirical contribution to Minsky’s financial fragility: evidence from non-financial sectors in Japan

Abstract

This study presents an empirical analysis to detect Minsky's financial fragility and its determinants in the nonfinancial sectors in Japan, with particular attention paid to differences between sectors and sizes. While Minsky developed theoretical analyses of financial fragility for use in economic growth models, its empirical application is limited. Based on the financial fragility indices derived from a cash flow accounting framework and Minsky's margins of safety, I detect the overall configuration and evolution of financial fragility (hedge, speculative, and Ponzi) in Japan. Then, the factors that determine the probability of being Ponzi finance are detected by using panel logistic regression. In doing so, this study reveals that although speculative finance is dominant in many sectors, the evolution of financial fragility is diversified and its determinants differ according to sector and size in Japan.

Minsky's Financial Fragility: An Empirical Analysis of Electricity Distribution Companies in Brazil (2007715)

“…This line of research, first suggested by Nishi (2016), could be promising and should be developed in future works in this field. Nishi (2016, 36).…”

“…First are works that analyze the trends of aggregate variables and elaborate on how they help to explain recessions or crises, such as Estenson (1987). Second are studies that use the Minskyan hedge, speculative, and Ponzi categories and aim at detecting one or more of these categories, such as Schroeder (2009) and Nishi (2016).…”

“…Other important work in this class of studies is Nishi (2016), in which the author analyzes financial fragility and its determinants in nonfinancial sectors in Japan. He uses firm-level data to classify Japanese enterprises into hedge, speculative, or Ponzi units in a large sample and then analyzes the determinants of financial fragility through a panel logit regression model.…”

“…Historically, the few works dedicated to this task focused on macroeconomic issues, treating national economies as a unit (Seccarecia 1988;Paula and Alves 2000;Schroeder 2009). More recently, a group of authors, such as Mulligan (2013), Nishi (2016, and Davis, Souza, and Hernandez (2017), started to develop financial fragility indices at the firm level, aiming to characterize the general behavior of fragility in selected sectors and the economy as a whole, as well as its determinants.…”

Minsky E a Fragilidade Financeira Das Distribuidoras Do Setor Elétrico Brasileiro

“…O nível de robustez ou de fragilidade financeira de uma economia dependeria da composição das unidades econômicas entre essas três categorias. Apesar da preocupação predominantemente macroeconômica da literatura minskyana, alguns poucos autores dessa tradição caminharam no sentido de realizar avaliações da fragilidade financeira a partir de um foco setorial (MULLIGAN, 2013;TYMOIGNE, 2014;NISHI, 2016;ROLIM et al, 2016;DAVIS et al, 2017;PEDROSA, 2017). Entretanto esses trabalhos, em geral, deram importância a segmentos que têm relevância sistêmica, a exemplo do sistema financeiro, ou avaliaram vários setores produtivos simultaneamente, como um passo preliminar para quantificar o risco financeiro da economia como um todo.…”