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    <title>EconStor Community: Bard College, Annandale-on-Hudson (NY)</title>
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  <item rdf:about="http://hdl.handle.net/10419/57088">
    <title>Causes of financial instability</title>
    <link>http://hdl.handle.net/10419/57088</link>
    <description>Title: Causes of financial instability
&lt;br/&gt;
&lt;br/&gt;Authors: Bezemer, Dirk
&lt;br/&gt;
&lt;br/&gt;Abstract: Given the economy's complex behavior and sudden transitions as evidenced in the 2007-08 crisis, agent-based models are widely considered a promising alternative to current macroeconomic practice dominated by DSGE models. Their failure is commonly interpreted as a failure to incorporate heterogeneous interacting agents. This paper explains that complex behavior and sudden transitions also arise from the economy's financial structure as reflected in its balance sheets, not just from heterogeneous interacting agents. It introduces flow-of-funds and accounting models, which were preeminent in successful anticipations of the recent crisis. In illustration, a simple balance-sheet model of the economy is developed to demonstrate that nonlinear behavior and sudden transition may arise from the economy's balance-sheet structure, even without any microfoundations. The paper concludes by discussing one recent example of combining flow-of-funds and agent-based models. This appears a promising avenue for future research.</description>
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  <item rdf:about="http://hdl.handle.net/10419/57087">
    <title>Money manager capitalism and the global financial crisis</title>
    <link>http://hdl.handle.net/10419/57087</link>
    <description>Title: Money manager capitalism and the global financial crisis
&lt;br/&gt;
&lt;br/&gt;Authors: Wray, L. Randall
&lt;br/&gt;
&lt;br/&gt;Abstract: This paper applies Hyman Minsky's approach to provide an analysis of the causes of the global financial crisis. Rather than finding the origins in recent developments, this paper links the crisis to the long-term transformation of the economy from a robust financial structure in the 1950s to the fragile one that existed at the beginning of this crisis in 2007. As Minsky said, 'Stability is destabilizing': the relative stability of the economy in the early postwar period encouraged this transformation of the economy. Today's crisis is rooted in what he called 'money manager capitalism,' the current stage of capitalism dominated by highly leveraged funds seeking maximum returns in an environment that systematically under-prices risk. With little regulation or supervision of financial institutions, money managers have concocted increasingly esoteric instruments that quickly spread around the world. Those playing along are rewarded with high returns because highly leveraged funding drives up prices for the underlying assets. Since each subsequent bust wipes out only a portion of the managed money, a new boom inevitably rises. Perhaps this will prove to be the end of this stage of capitalism-the money manager phase. Of course, it is too early even to speculate on the form capitalism will take. I will only briefly outline some policy implications.</description>
  </item>
  <item rdf:about="http://hdl.handle.net/10419/57086">
    <title>Three futures for postcrisis banking in the Americas: The financial trilemma and the Wall Street complex</title>
    <link>http://hdl.handle.net/10419/57086</link>
    <description>Title: Three futures for postcrisis banking in the Americas: The financial trilemma and the Wall Street complex
&lt;br/&gt;
&lt;br/&gt;Authors: Dymski, Gary A.
&lt;br/&gt;
&lt;br/&gt;Abstract: This would seem an opportune moment to reshape banking systems in the Americas. But any effort to rethink and improve banking must acknowledge three major barriers. The first is a crisis of vision: there has been too little consideration of what kind of banking system would work best for national economies in the Americas. The other two constraints are structural. Banking systems in Mexico and the rest of Latin America face a financial regulation trilemma, the logic and implications of which are similar to those of smaller nations' macroeconomic policy trilemma. The ability of these nations to impose rules that would pull banking systems in the direction of being more socially productive and economically functional is constrained both by regional economic compacts (in the case of Mexico, NAFTA) and by having a large share of the domestic banking market operated by multinational banks. For the United States, the structural problem involves the huge divide between Wall Street megabanks and the remainder of the U.S. banking system. The ambitions, modes of operation, and economic effects of these two different elements of U.S. banking are quite different. The success, if not survival, of one element depends on the creation of a regulatory atmosphere and set of enabling federal government subsidies or supports that is inconsistent with the success, or survival, of the other element.</description>
  </item>
  <item rdf:about="http://hdl.handle.net/10419/57085">
    <title>A perspective on Minsky moments: The core of the financial instability hypothesis in light of the subprime crisis</title>
    <link>http://hdl.handle.net/10419/57085</link>
    <description>Title: A perspective on Minsky moments: The core of the financial instability hypothesis in light of the subprime crisis
&lt;br/&gt;
&lt;br/&gt;Authors: Vercelli, Alessandro
&lt;br/&gt;
&lt;br/&gt;Abstract: This paper aims to help bridge the gap between theory and fact regarding the so-called 'Minsky moments' by revisiting the 'financial instability hypothesis' (FIH). We limit the analysis to the core of FIH-that is, to its strictly financial part. Our contribution builds on a reexamination of Minsky's contributions in light of the subprime financial crisis. We start from a constructive criticism of the well-known Minskyan taxonomy o f financial units (hedge, speculative, and Ponzi) and suggest a different approach that allows a continuous measure of the unit's financial conditions. We use this alternative approach to account for the cyclical fluctuations of financial conditions that endogenously generate instability and fragility. We may thus suggest a precise definition of the 'Minsky moment' as the starting point of a Minskyan process-the phase of a financial cycle when many financial units suffer from both liquidity and solvency problems. Although the outlined approach is very simple and has to be further developed in many directions, we may draw from it a few policy insights on ways of stabilizing the financial cycle.</description>
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