Three Decades of Modelling Minsky: What We Have Learned and the Way Forward

Abstract

This paper intends to contribute to the contemporary discussions about Minsky’s economics by reviewing how the key ideas of Minsky have been formalised in the heterodox literature over the last three decades or so. First, a distinction is made between the different models based on (a) the source of financial instability they focus on, (b) the type of heterodox macroeconomic framework into which Minskyan ideas are incorporated and (c) the purpose and the nature of the dynamic analysis. Second, the key lessons learned from modelling Minsky are outlined. Finally, the paper calls for more empirically driven models, points out the usefulness of agent-based approaches and highlights the need for the development of Minskyan models on open economy, shadow banking and environmental issues.

Keywords: Minsky, financial instability, post-Keynesian economics

JEL Classification: E12, E32, E44