Margins of Safety and Weight of the Argument in Generating Financial Fragility

Kregel, Jan

doi:10.1080/00213624.1997.11505945

Cited by 71 publications

(50 citation statements)

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“…As Kregel (1986) observed, the finance stage is not obligatory, since investment can be financed directly by issuing shares or long-term debt. This situation is less likely than the one depicted by Keynes, however.…”

Section: Financial Constraints On Economic Development: Theory and Pomentioning

confidence: 99%

“…This is so, for example, in situations of particular asset price volatility, which encourage speculative operations aimed rather at profit than at protection, and those where herd behaviour takes over, since volatility makes it hard to arrive at reliable estimates (Kregel, 1997).…”

Section: Policies On Financial Fragility (A) Domestic Financial Fragimentioning

confidence: 99%

“…As Kregel (1980) observed, the problem is not confined to information costs and access, but includes the very existence, at the critical juncture, of the forward-looking indicators needed to estimate asset risks and returns. Uncertainty, unlike risk, cannot be priced, i.e.…”

Section: Financial Constraints On Economic Development: Theory and Pomentioning

confidence: 99%

“…Because of this, the market tends to amplify asset appreciation or depreciation trends, creating speculative bubbles in the first case and asset deflation crises in the second. Minsky (1982 and1986) adds to this analysis the financial fragility hypothesis, pointing out that: (i) phases of economic growth are always accompanied by higher debt; (ii) the level of debt tends to rise with the degree of development of the financial system; (iii) the expectations driving this borrowing are surrounded by uncertainty; (iv) the ability to make repayments may be jeopardized when these expectations are not met, creating the risk of liquidity crises in the financial system, and (v) fulfilment of these expectations does not in itself guarantee safety for the market either, as it tends to prolong phases of bullishness, sometimes unduly, thus creating speculative bubbles that likewise trigger financial crises when they burst (Kregel, 1997).…”

Section: Financial Constraints On Economic Development: Theory and Pomentioning

confidence: 99%

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Financial constraints on economic development: theory and policy for developing countries

Hermann¹

2014

CEPAL Review

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This article contains a theoretical and policy analysis of the financial constraints on economic development in developing countries. Following a Keynesian interpretation, it concludes that financial policies are needed to relieve these constraints, given the natural tendency of financial systems to operate in ways that are dysfunctional to economic development.It then proposes three lines of policy that take account of the special characteristics of developing countries: resource allocation policies targeted at segments of strategic importance for economic and financial development; policies to control financial and external fragility; and compensatory policies of a more interventionist cast, in particular directed credit programmes for both public-and private-sector lending to complement resource allocation policies, and countercyclical regulatory barriers so that fragility can be better controlled.

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Section: Financial Constraints On Economic Development: Theory and Pomentioning

confidence: 99%

Section: Policies On Financial Fragility (A) Domestic Financial Fragimentioning

confidence: 99%

Section: Financial Constraints On Economic Development: Theory and Pomentioning

confidence: 99%

Section: Financial Constraints On Economic Development: Theory and Pomentioning

confidence: 99%

See 2 more Smart Citations

Financial constraints on economic development: theory and policy for developing countries

Hermann¹

2014

CEPAL Review

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“…Thus, processes of asset inflation and deflation have become recurring, exacerbating the intrinsic instability of capitalism, given that expenditure and borrowing decisions made by companies and households have become increasingly sensitive to current and expected fluctuations in the financial asset prices -the so-called "wealth effect." The depreciation of these assets thus reduces the wealth of the players, resulting in fewer loans and lower expenditure, with negative effects on the effective demand and vice versa (Coutinho;Belluzzo, 1998;Minsky, 1986;Kregel, 1997).…”

Section: Financialization As a Systemic Pattern Of Wealthmentioning

confidence: 99%

For a political economy of financialization: theory and evidence

et al. 2017

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The end of the Bretton Woods agreement led not only to changes in the international economic relations, but also in the very way in which capitalism functions. The liberalization of capital flows and deregulation and integration of financial markets under US leadership gave rise to a new systemic pattern of wealth, financialization, in which operations with financial assets received increased importance in the management of wealth by households and enterprises, and not only by banks and the other financial market institutions. Unlike most recent interpretations of this phenomenon, this one does not indicate a tendency of the system towards stagnation, but rather an increase in the instability that characterizes it, reinforcing the moments of expansion, contraction, as well as leading to crises. In fact, with the generalization and the dominance of finance, borrowing and spending decisions by enterprises and households are now increasingly responsible for current and expected fluctuations in the stock of wealth, which in turn are responsive to current and expected fluctuations in the prices of financial assets. This implies a transformation in the relationship between the state and the market, with central banks and national treasures becoming hostage to the need to prevent private losses and the perverse effects they may exercise over output, income and employment levels of the economy.Keywords: Financialization; Contemporary capitalism; Economic dynamic; Instability; Inequality. ResumoPor uma economia política da financeirização: teoria e evidências O fim do arranjo de Bretton Woods ensejou não apenas uma mudança na forma de funcionamento das relações econômicas em âmbito mundial, mas também no próprio modo de operação do capitalismo. A liberalização dos fluxos de capitais e a desregulamentação e integração dos mercados financeiros internacionais sob a liderança dos Estados Unidos deu origem a um novo padrão sistêmico de riqueza, a financeirização, em que as operações financeiras ganham importância cada vez maior na gestão de ativos e passivos por parte das famílias e das empresas, e não apenas de instituições do mercado financeiro. Ao contrário do que sugerem interpretações mais recentes sobre esse fenômeno, isso não significa uma tendência do sistema à estagnação, mas um aumento da sua instabilidade característica, reforçando os momentos de expansão, mas também de contração. De fato, com a generalização e a  Article received on April 10, 2017 and approved on September 18, 2017. ** Professors at the Institute of Economics -University of Campinas, Campinas, SP, Brazil. E-mails: bragajcs@uol.com.br; giulianoliveira@gmail.com; alex.wilhans@gmail.com; simonededeos@gmail.com. *** PhD student in Economics at the Institute of Economics -University of Campinas, Campinas, SP, Brazil. E-mail: paulowwolf@gmail.com. dominância da lógica financeira as decisões de endividamento e de gasto das empresas e das famílias passaram a ser crescentemente sensíveis às oscilações correntes e esperadas nos estoques de riqueza,...

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2009

Globalization and Islamic Finance

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Margins of Safety and Weight of the Argument in Generating Financial Fragility

Cited by 71 publications

References 3 publications

Financial constraints on economic development: theory and policy for developing countries

Financial constraints on economic development: theory and policy for developing countries

For a political economy of financialization: theory and evidence

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