Minsky's acceleration channel and the role of money

Hyman Minsky suggested a possible channel through which monetary policy could affect the economy. He asserted that rising interest rates due to contractionary monetary policy compromised the balance sheets of firms that had financed long-term positions in illiquid assets with short-term borrowing. A...

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Bibliographic Details
Published inJournal of post Keynesian economics Vol. 27; no. 3; pp. 471 - 489
Main Author HANNSGEN, GREG
Format Journal Article
LanguageEnglish
Published Abingdon Routledge 01.04.2005
M. E. Sharpe
M.E. Sharpe, Inc
Taylor & Francis Ltd
SeriesJournal of Post Keynesian Economics
Subjects
Economic models
Economic policy
Economic recessions
Economic theory
Economics
endogenous money
Financial economics
Financial investments
Inflation controls
Interest rates
Keynesianism
Minsky&#146s financial fragility hypothesis
Minsky, Hyman P
Minsky’s financial fragility hypothesis
Monetary economics
Monetary policy
Monetary theory
Post Keynesian economics
Regression analysis
Studies
U.S.A
vector autoregression (VAR)
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Summary:Hyman Minsky suggested a possible channel through which monetary policy could affect the economy. He asserted that rising interest rates due to contractionary monetary policy compromised the balance sheets of firms that had financed long-term positions in illiquid assets with short-term borrowing. As interest rates rose, the debt service costs of a project increased relative to the present discounted value of its future revenue streams. A model based on Minsky's theory confirms its plausibility. The model also shows that anti-inflationary policy potentially destabilizes if used too aggressively. A vector autoregression analysis suggests that postwar U.S. data are consistent with Minsky's theory.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0160-3477
1557-7821
DOI:10.1080/01603477.2005.11051450