The financial instability hypothesis and its implications to the economic cycles

Abstract

The aim object of this paper is to analyze USA house credit market in a financial system from Minskyan background. By this perspective, it is suggested a way to understand the cyclical dynamics of the house mortgage debt on consume, investment and economic growth. It will be demonstrated that the frail financial household structure was in great measure an endogenous process, given the adoption of financial postures increasingly leveraged. However, in spite of the endogenous process, it will be verified that the reversion of the economical tendency began through an exogenous shock, starting from the rise of the basic interest rate of the economy, submitting several economical agents to a speculative and Ponzi configuration, affecting several market sectors.