Hyman Minsky's financial instability hypothesis and the Greek debt crisis

Abstract

This article attempts to analyze the current debt crisis in Greece based on the financial instability hypothesis developed by Hyman Minsky. This article shows that the hypothesis provides an understanding of how an economy endogenously becomes "financially fragile" and thus prone to crises. The authors analyze how public and private sector behavior in the Greek economy led to the country's debt crisis. In particular, based on a sample of 36 Greek companies, the authors show that between 2001 and 2014, the majority of those companies had switched to fragile financial structures. Special attention is devoted to the negative consequences of applying the neoclassical doctrine of "austerity measures" in Greece as the principal "anti-crisis" concept of mainstream economic science.