The Minskyian Model of Economic Crises

Minsky - Credit Supply and Crashes

Minskyian economic theory directly links an oscillating aggregate supply of credit in an economy to the potential for economic crisis. It suggests that credit supply has a cyclical nature in highly financial economies. Thus the seeds of crisis are¬†endogenously sown during seemingly productive booming previous periods. This piece will describe the model’s principles and note how its theories stray from mainstream economic thought. This analysis will come in useful in future posts, as the model seems to well approximate numerous historical crises – and of current importance: the ongoing travails of the Chinese economy in 2015.

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