Bank profitability, leverage and financial instability: a Minsky-Harrod model

Ryoo, Soon

doi:10.1093/cje/bes078

“…7. Clockwise cycles are the normal outcome in the financial-real interplay (Ryoo, 2013a;2013b). Goodwin (1967), in his first predator-prey model that ignored financial variables, obtained counter-clockwise movements.…”

Section: Model 1: Risky Finance Without Speculation -The Negative Impmentioning

confidence: 99%

“…The final effects on the real economy will depend on whether we adopt a Kaleckian view (capacity utilization closure) or a Kaldorian one (profit share closure). In the Kaldorian version, the real sector itself has an inherent tendency towards cyclical behavior ('short cycles'), along with the cyclical forces generated by endogenous changes in financial practices ('long waves') (Skott 1994;Ryoo and Skott 2008;Skott and Ryoo 2008;Ryoo 2013a;2013b).…”

Section: Introductionmentioning

confidence: 99%

A predator–prey model to explain cycles in credit-led economies

Dejuán¹,

Dejuán-Bitriá²

2018

ROKE

View full text Add to dashboard Cite

This paper develops a predator-prey model to explain cycles in credit-led economies. The predator is the part of the financial sector that issues credit money for non-output transactions. It increases the indebtedness ratio and inflates bubbles that eventually have a negative impact on the real rate of growth (the prey). From this basis, we build a couple of models that may lead to self-contained or explosive cycles. Even in the first case, there is a risk of a financial collapse when certain variables move far away from their longterm equilibrium positions. In order to tame the cycle and avoid extreme positions, governments should ban the expansion of credit money for the purchase of assets and introduce permanent checks to risky credit.

show abstract

“…In contrast to the previous models, banks in these models apply credit rationing explicitly and this credit rationing is affected by banks’ financial position. Credit rationing refers either to the volume of credit that is supplied by banks (Ryoo, ; Nikolaidi, ) or to the interest rate that is charged by banks which, in turn, affects the amount of credit (Delli Gatti et al ., , ). In these models, the interaction between the financial position of firms and the financial position of banks plays a central role in the emergence of cycles and instability.…”

Section: Overview and Structure Of Minsky Modelsmentioning

confidence: 99%

“…Minsky, 1986 [], p. 265). The models of Ryoo (), Nikolaidi () and Delli Gatti et al . (, ) belong to the credit rationing Minsky models…”

Section: Debt or Interest Dynamicsmentioning

confidence: 99%

See 1 more Smart Citation

Minsky Models: A Structured Survey

Nikolaidi

¹

,

Stockhammer²

2017

Journal of Economic Surveys

View full text Add to dashboard Cite

Minsky's ideas have recently gained prominence in the mainstream as well as in the heterodox literature. However, there exists no agreement upon the formal presentation of Minsky's insights. The aim of this paper is to survey the literature and identify differences and similarities in the ways through which Minskyan ideas have been formalised. We distinguish between the models that focus on the dynamics of debt or interest, with no or a secondary role for asset prices, and the models in which asset prices play a key role in the dynamic behaviour of the economy. Within the first category of models we make a classification between (i) the Kalecki-Minsky models, (ii) the Kaldor-Minsky models, (iii) the Goodwin-Minsky models, (iv) the credit rationing Minsky models, (v) the endogenous target debt ratio models and (vi) the Minsky-Veblen models. Within the second category of models, we distinguish between (i) the equity price Minsky models and (ii) the real estate price Minsky models. Key limitations of the models and directions for future research are outlined. Year: 2017No: GPERC50 GREENWICH POLITICAL ECONOMY RESEARCH CENTRE (GPERC)

show abstract

Minsky Models: A Structured Survey

Nikolaidi¹,

Stockhammer²

2018

Analytical Political Economy

View full text Add to dashboard Cite

Minsky's ideas have recently gained prominence in the mainstream as well as in the heterodox literature. However, there exists no agreement upon the formal presentation of Minsky's insights. The aim of this paper is to survey the literature and identify differences and similarities in the ways through which Minskyan ideas have been formalised. We distinguish between the models that focus on the dynamics of debt or interest, with no or a secondary role for asset prices, and the models in which asset prices play a key role in the dynamic behaviour of the economy. Within the first category of models we make a classification between (i) the Kalecki-Minsky models, (ii) the Kaldor-Minsky models, (iii) the Goodwin-Minsky models, (iv) the credit rationing Minsky models, (v) the endogenous target debt ratio models and (vi) the Minsky-Veblen models. Within the second category of models, we distinguish between (i) the equity price Minsky models and (ii) the real estate price Minsky models. Key limitations of the models and directions for future research are outlined.

show abstract

Bank profitability, leverage and financial instability: a Minsky-Harrod model

Cited by 45 publications

References 18 publications

A predator–prey model to explain cycles in credit-led economies

A predator–prey model to explain cycles in credit-led economies

Minsky Models: A Structured Survey

Minsky Models: A Structured Survey

Contact Info

Product

Resources

About