The COVID-19 Crisis: A Minskyan Approach to Mapping and Managing the (Western?) Financial Turmoil

Levy Economics Institute, Working Papers Series 2020

32 Pages Posted: 18 Sep 2020

See all articles by Leonardo Burlamaqui

Leonardo Burlamaqui

Universidade do Estado do Rio de Janeiro (UERJ)

Ernani Torres Filho

Instituto de Economia

Date Written: September 15, 2020

Abstract

The COVID-19 crisis paralyzed huge parts of the planet in weeks. It not only infected the population but injected a gargantuan dose of uncertainty into the system. In that regard, as in many others, it is a phenomenon without precedent. As of the time of writing (May–June 2020), we are witnessing, simultaneously, a health crisis, an economic crisis, and a crisis of global governance as well. In the forthcoming months, it could well turn into a set of financial, social, and political crises most governments and international organizations are ill-prepared to handle. In this paper, what concerns us is the financial dimension of the crisis. The paper is divided into four sections. Following the introduction, the second section maps the financial dimension of the pandemic through an extension of Hyman Minsky’s financial fragility analysis. The result is a three-pronged analytical framework that encompasses financial fragility, financial instability, and insolvency-triggered asset-liability restructuring processes. These are seen as three distinct but interconnected processes advancing financial fragility. The third section dissects how these three processes have been managed as they have unfolded since March 2020, underlining the key policy interventions and institutional innovations introduced so far, and suggesting further measures for addressing the forthcoming stages of the financial turmoil. The fourth section concludes the paper by pointing out the results as of June 2020 and highlights our intended analytical contribution to Minsky’s theoretical framework.

Keywords: COVID-19 Crisis, Financial Fragilization, Financial Instability, Asset-Liabilities Restructuring, Minsky

JEL Classification: E02, G01, G18, G20

Suggested Citation

Burlamaqui, Leonardo and Torres Filho, Ernani, The COVID-19 Crisis: A Minskyan Approach to Mapping and Managing the (Western?) Financial Turmoil (September 15, 2020). Levy Economics Institute, Working Papers Series 2020, Available at SSRN: https://ssrn.com/abstract=3693116 or http://dx.doi.org/10.2139/ssrn.3693116

Leonardo Burlamaqui (Contact Author)

Universidade do Estado do Rio de Janeiro (UERJ) ( email )

Rua Tonelero, 380 apt. 804
Copacabana, 22030-000
Brazil

Ernani Torres Filho

Instituto de Economia ( email )

Av. Pasteur, 250
Terreo - Urca
Rio de Janeiro, Rio de Janeiro 22290-902
Brazil

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