Financial crisis, a phenomena or a part of an economic and financial cycle which occurs when “…bankers, traders, and other financiers periodically played the role of arsonists, setting the entire economy ablaze.” (Cassidy, 2008)
In the following we will take a closer look on the “Financial Instability Hypothesis” (FIH), it will be examined in what extent Hyman Philip Minsky (H.P.M.) predicted the financial crises in his theories and whether it can be proved or not by setting his theoretical aspects in comparison to the late occurrences of the Sub-prime crises.
After giving the most important facts about H.P.M., his Financial Instability Hypothesis will be summarized and illuminated with its main aspects.
Subsequently this hypothesis will be analyzed concerning essential theories that had much impact on his instability thesis, for instance “The General Theory” (TGT) of the economist John Maynard Keynes. Additionally the formation of financial crises will be illustrated with regard to Minsky’s assumption of three different types of asset holders. The Hedge-, the Speculative- and the Ponzi-debtor will be defined and explained concerning how they influence the business-cycle and could lead to a destabilized financial market. With hindsight the Sub-prime crises of 2007, which can also be defined as a financial crisis, main aspects of the development on the financial market and within the economy will be indicated to illustrate the so called “Minsky Moment”.
In the end the conclusion implies not only Hyman Minsky’s advice and solution to avoid another financial crisis in the future but also our opinion upon Minsky’s Instability Hypothesis and its significance with regard to the overall question of: How far does Hyman P. Minsky’s Instability Hypothesis elucidate a financial crisis.
Inhaltsverzeichnis (Table of Contents)
- INTRODUCTION
- BIOGRAPHY
- MINSKY'S THEORY
- ANALYSIS
- Essential theories: Marx and Keynes
- Keynes
- The Financial Instability Hypothesis
- Three types of finance
- Instability and business-cycle
- The Sub-prime crisis 2007 - A “Minsky Moment”?
- The late 2000s financial crisis
- Was it a “Minsky Moment”?
- CONCLUSION
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This research paper aims to analyze Hyman Philip Minsky's "Financial Instability Hypothesis" (FIH) and assess its predictive power regarding the 2007 Sub-prime crisis. The paper will explore Minsky's theoretical framework, examine its connection to key economic theories, and evaluate its applicability to real-world events.
- Hyman P. Minsky's Financial Instability Hypothesis
- Analysis of the Sub-prime crisis 2007
- Impact of Keynesian economics on Minsky's theory
- Influence of different types of finance on business cycles
- The concept of the "Minsky Moment" and its relevance to financial crises
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: This chapter introduces the research topic and provides an overview of the "Financial Instability Hypothesis" (FIH). It outlines the paper's objectives and research questions.
- Biography: This chapter provides biographical information about Hyman P. Minsky and highlights his significant contributions to economics.
- Minsky's Theory: This chapter summarizes Minsky's "Financial Instability Hypothesis," outlining its key concepts and assumptions.
- Analysis: This chapter examines the connections between Minsky's theory and other influential economic theories, particularly Keynesian economics. It explores how different types of finance influence business cycles and contributes to financial instability.
- The Sub-prime crisis 2007 - A “Minsky Moment”?: This chapter analyzes the 2007 Sub-prime crisis and evaluates whether it aligns with Minsky's predictions. It examines the crisis's main characteristics and discusses the "Minsky Moment" concept in this context.
Schlüsselwörter (Keywords)
Key terms and concepts explored in this research paper include: Financial Instability Hypothesis, Hyman P. Minsky, Sub-prime crisis, Keynesian economics, business cycles, financial instability, speculative finance, Ponzi finance, and Minsky Moment. The paper focuses on understanding how Minsky's theory can explain and predict financial crises.
- Quote paper
- Thomas Hillen (Author), Marlene Klußmann (Author), 2012, The Hyman P. Minsky Hypothesis. An analysis and the effect on the subprime crisis 2007, Munich, GRIN Verlag, https://www.grin.com/document/274939
