, Volume 23, Issue 3, pp 199-221
Date: 22 Oct 2009

Competing explanations of the Minsky moment: The financial instability hypothesis in light of Austrian theory

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This paper evaluates the Minsky hypothesis. I discuss the Austrian theory of the business cycle against his theory, from the perspective of the theory and with reference to the current crisis. Minsky offers some of the theoretical details of speculation during the boom phase, which is a positive feature of his hypothesis and allows us to see more clearly how the recent financial crisis played itself out, but in the end his cycle theory remains incomplete. The Minsky moment—a feature of the recent housing bubble—is something that the Austrian theory of the cycle is already fit to explain.