Debt-GDP cycles in historical perspective: the case of the USA (1889–2014)
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Since the Global Financial Crisis, interest in financial cycles has risen significantly. While much of modern macroeconomics conceives financial crises as the results of exogenous shocks, Minsky’s financial instability hypothesis posits that financial cycles are endogenous to the economic system. The main contribution of this paper is to use historical macroeconomic data for the United States (1889–2014) to econometrically test for endogenous Minsky cycles: the interaction of procyclical private debt-to-income ratios and a dampening effect of private debt on economic activity. We analyze corporate debt-gross domestic product (GDP) growth cycles, which feature in Minsky’s original writings, and mortgage debt-GDP growth cycles as in some recent Minsky-inspired models. We find robust evidence of endogenous corporate debt-GDP cycles over the last 125 years. These results are driven by the pre-World War II (WWII), and post-1973 periods, which had a more liberal economic policy orientation. We find no evidence of mortgage debt-GDP cycles.
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Rising financial commitments for non-financial firms are associated with the decline of real investment in both advanced and developing economies over the last 30 years.
“First, rising financial commitments for non-financial firms are associated with the decline of real investment in both advanced and developing economies over the last 30 years”
From Mapping modern economic rents: the good, the bad, and the grey areas (2023) · cites this paper as Stockhammer and Gouzoulis, 2022
The Econometric results and discussion (section 5; page unavailable) find a negative association between business debt and real investment in the United States, including during 1973–2014. That supports the debt–investment relationship, but the paper does not establish it for both advanced and developing economies or specifically for the last 30 years. (LLM, conf=0.88)
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Mapping modern economic rents: the good, the bad, and the grey areas
Mazzucato, M., Ryan-Collins, J., & Gouzoulis, G. (2023) · Cambridge Journal of Economics · doi:10.1093/cje/bead013 · Cited by 54 · see citing works
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- Authors
- Stockhammer, E., & Gouzoulis, G.
- Affiliations
- King's College London (GB)
- University of Bristol (GB)
- Corresponding author
- Gouzoulis, Giorgos
- Venue
- Industrial and Corporate Change
- Publisher
- Oxford University Press (OUP)
- Published
- 2022-09-20
- Volume
- 32
- Issue
- 2
- Pages
- 317-335
- ISSN
- 0960-6491 (ISSN-L)
- 1464-3650
- OpenAlex
- W4296781174
- Cited by
- 7
- References
- 0
- Citations by year
- 2026: 2 · 2024: 2 · 2023: 3
- FWCI
- 1.73
- Type
- journal article
- Language
- en
- Open access
- hybrid
- doi.org
- Licence
- Locations
- Industrial and Corporate Change (publishedVersion, cc-by)
- Research Portal (King's College London) (publishedVersion, cc-by-nc-nd)
- RePEc: Research Papers in Economics (submittedVersion)
- Queen Mary Research Online (Queen Mary University of London) (submittedVersion, cc-by)
- Explore Bristol Research (submittedVersion, cc-by)
- Funders
- Institute for New Economic Thinking (INO16-00008)
- Topics
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Economic Theory and Policy
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Fiscal Policies and Political Economy
- Social Sciences › Economics, Econometrics and Finance › Finance › Global Financial Crisis and Policies
- Keywords
- financial instability hypothesis, Hyman Minsky, corporate debt, mortgage debt, procyclicality, financial crisis
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