Marco Veronese Passarella

Minsky in the ‘New’ Capitalism: The New Clothes of the Financial Instability Hypothesis

This Companion provides a timely and engaging treatment of Hyman Minsky’s approach to economics, which is enjoying a renewed appreciation because of its prescient analysis of the slow but sure transformation of the capitalist economy in the post-war period. Many have called the global financial crisis that began in the United States in 2007 a ‘Minsky crisis’, and these original contributions demonstrate precisely why both academic economists as well as policymakers have turned to Minsky for guidance. The book brings together the foremost Minsky scholars to provide a comprehensive overview of his approach, with extensions to bring the analysis up to date.

The Monetary Circuit in the Age of Financialisation: A Stock-Flow Consistent Model with A Twofold Banking Sector

The paper explores how the Theory of Monetary Circuit can be developed to reflect some important features of the evolution of the financial system in the past three decades, which have been associated with what may be termed ‘financialisation.’ For this purpose, we embed the benchmark single-period monetary circuit scheme proposed by Graziani in a richer set of institutional arrangements. The stock-flow consistent modelling technique pioneered by Godley and Lavoie is used to support our narrative.

The Paradox of Tranquility Revisited - A Lotka-Volterra Model of the Financial Instability

The aim of this paper is to describe by means of a simple Lotka-Volterra model the financial vulnerability of corporate sector. This should allow us to soften Lavoies criticism of Minskys «Financial Instability Hypothesis» which is based on the so-called «paradox of debt».

Financialization and the Monetary Circuit: A Macro-accounting Approach

Abstract This paper aims to cross-breed the standard monetary circuit accounting model with elements from the Post-Keynesian literature. The goals are: (i) to analyse the implications of credit-based household consumption fed by capital asset inflation for the soundness of a pure credit-money economy of production; and (ii) to provide a more sophisticated description of the working of modern financial systems than the one grounded in the usual ‘bank-based vs. market based’ distinction.

Finance and the Realization Problem in Rosa Luxemburg: a ‘Circuitist’ Reappraisal

The aim of this chapter is to show that Rosa Luxemburg’s analysis of capitalist accumulation is framed within a ‘circuitist’ macroeconomic reading of capitalism as a monetary production economy. The strengths and limits of her approach are to be found elsewhere than suggested by usual criticisms, especially those advocated by Marxist authors. Rosa Luxemburg cannot be reduced to the uncertain theoretical status of an ‘under-consumptionist’. On the contrary, she presents a clear (although incomplete) picture of the macro-monetary and sequential working of the capitalist process.

The Role of Commercial Banks and Financial Intermediaries in the New Consensus Macroeconomics (NCM): A Preliminary and Critical Appraisal of Old and New Models

Giuseppe Fontana and Marco Veronese Passarella in this chapter, entitled, ‘Aggregate Demand, Money and Finance in the New Consensus Macroeconomics: a Critical Appraisal’, critically assess the ‘New Consensus Macroeconomics’ (NCM) theory and its recent developments. Building on the Wicksellian ‘two-interest rates model’, the NCM highlights the role of interest rates in the transmission mechanism of monetary policy, whereas monetary aggregates are treated as residual variables. However, in contrast with Wicksell’s theory, banks and financial institutions are usually neglected in the NCM theory. As a result, the financial instability and recurrent banking crises of modern economies have received little attention in modern macroeconomics. This chapter has three main goals. First, it aims to provide a critical analysis of the original NCM model and some recent developments. Second, it aims to show that few amendments to it are sufficient to account for the financial instability and banking crises of real-world economies. Third, it shows that some important policy-making conclusions logically follow once the role of banks, credit and finance is properly taken on board.