Skip to main content
Mobile
  • Finance, Accounting & Economics
  • Global Business Management
  • Management, Leadership & Organisation
  • Marketing & Sales
  • Strategy
  • Technology & Operations
HS Talks HS Talks
Subjects  
Search
  • Notifications
    Notifications

    No current notifications.

  • User
    Welcome Guest
    You have Limited Access The Business & Management Collection
    Login
    Get Assistance
    Login
    Forgot your password?
    Login via your organisation
    Login via Organisation
    Get Assistance
Finance, Accounting & Economics
Global Business Management
Management, Leadership & Organisation
Marketing & Sales
Strategy
Technology & Operations
Practice paper

Banking regulation, behavioural finance and the financial crisis in Europe: Looking to the Kindleberger-Minsky paradigm

Yves Rannou
Journal of Risk Management in Financial Institutions, 3 (3), 278-295 (2010)
https://doi.org/10.69554/CVMM7948

Abstract

Post-Keynesian analysis, such as that of Charles Kindleberger and Hyman P. Minsky, describes the kind of decision making that affects the state of the macroeconomy and examines the financial innovations that facilitated the recent real-estate boom and bust. According to a Minsky process of sustained increasing financial fragility, the subprime crisis is responsible for a full-scale bout of systemic instability and debt deflation. The present paper builds on the Kindleberger-Minsky paradigm by showing how the present period of financial distress in Europe is due to stochastic asset price dynamics with herding and financial constraints in the decisions of heterogeneous agents. Using simulations, the paper shows that the crisis is due to agents' wealth distribution dynamics, selling because of financial constraints after the bubble has peaked due to the switching behaviour of agents. It suggests that central banks, notably the European Central Bank, could act in response to asset price movements only in the presence of sharp financial market corrections. The paper concludes by suggesting short-term solutions to the current crisis, as well as longer-term policy to prevent a recurrence of its destabilising effects.

Keywords: Minsky; financial instability hypothesis; heterogeneous agents; bubbles; subprime financial crisis; monetary policy

The full article is available to subscribers to the journal.

Already a subscriber? Login or review other options.

Author's Biography

Yves Rannou recently joined Barclays Capital, as an equity derivatives and commodity analyst. He is responsible for developing or sourcing both internal and outsourced risk management software solutions. He has an MBA (HEC Nantes) and a master’s degree in financial markets (Strathclyde University). His postgraduate thesis ‘The trading niche of penny stocks’ was awarded a CFPI distinction. Previously, he worked as a research assistant at Société Générale, creating new risk-adjusted measures for securitised products. He has also lectured MSc students at the Audencia School of Management. His research interests are focused on risk management, options pricing and dynamic asset allocation. Forthcoming academic papers include ‘Investing in emerging markets: An asymmetric stochastic multivariate volatility model to diversify a portfolio of assets efficiently’, for the 2008 Stochastic Modelling Symposium sponsored by the Canadian Institute of Actuaries.

Citation

Rannou, Yves (2010, June 1). Banking regulation, behavioural finance and the financial crisis in Europe: Looking to the Kindleberger-Minsky paradigm. In the Journal of Risk Management in Financial Institutions, Volume 3, Issue 3. https://doi.org/10.69554/CVMM7948.

Options

  • Download PDF
  • Share this page
    Share This Article
    Messaging
    • Outlook
    • Gmail
    • Yahoo!
    • WhatsApp
    Social
    • Facebook
    • X
    • LinkedIn
    • VKontakte
    Permalink
cover image, Journal of Risk Management in Financial Institutions
Journal of Risk Management in Financial Institutions
Volume 3 / Issue 3
© Henry Stewart
Publications LLP

The Business & Management Collection

  • ISSN: 2059-7177
  • Contact Us
  • Request Free Trial
  • Recommend to Your Librarian
  • Subscription Information
  • Match Content
  • Share This Collection
  • Embed Options
  • View Quick Start Guide
  • Accessibility

Categories

  • Finance, Accounting & Economics
  • Global Business Management
  • Management, Leadership & Organisation
  • Marketing & Sales
  • Strategy
  • Technology & Operations

Librarian Information

  • General Information
  • MARC Records
  • Discovery Services
  • Onsite & Offsite Access
  • Federated (Shibboleth) Access
  • Usage Statistics
  • Promotional Materials
  • Testimonials

About Us

  • About HSTalks
  • Editors
  • Contact Information
  • About the Journals

HSTalks Home

Follow Us On:

HS Talks
  • Site Requirements
  • Copyright & Permissions
  • Terms
  • Privacy
  • Sitemap
© Copyright Henry Stewart Talks Ltd

Personal Account Required

To use this function, you need to be signed in with a personal account.

If you already have a personal account, please login here.

Otherwise you may sign up now for a personal account.

HS Talks

Cookies and Privacy

We use cookies, and similar tools, to improve the way this site functions, to track browsing patterns and enable marketing. For more information read our cookie policy and privacy policy.

Cookie Settings

How Cookies Are Used

Cookies are of the following types:

  • Essential to make the site function.
  • Used to analyse and improve visitor experience.

For more information see our Cookie Policy.

Some types of cookies can be disabled by you but doing so may adversely affect functionality. Please see below:

(always on)

If you block these cookies or set alerts in your browser parts of the website will not work.

Cookies that provide enhanced functionality and personalisation. If not allowed functionality may be impaired.

Cookies that count and track visits and on website activity enabling us to organise the website to optimise the experience of users. They may be blocked without immediate adverse effect.