The analysis lays the foundation for Minsky’s theory, which exposes the states of the economy it goes through over evolutionary time: expansion and significant progress, then downturn either in the form of recession with negative development (or growth recession) or full-blown depression with heightened uncertainty and risk that seems uncontrollable. At some stage, the economy goes into recovery mode from Darwin’s ‘survival of fittest’ account of the intense market competition, travelling back to the expansion stage with fresh consumption and investment opportunities to explore and exploit on account of Schumpeter’s process of creative destruction. This will have significant implications for the variability of the banking sector’s deposit base, which can be modelled within the catastrophe framework to explain abrupt changes in money as loanable funds in relation to the build-up of uncertainty and default risk within the monetary economy.
Loanable funds cycle Minsky’s theory Recession Schumpeter Deposit base Banking Monetary economy
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References and Further Reading
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