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One implication of the SES indicator is that a firm is considered “systemically risky” if it faces a high probability of capital shortage when the financial sector is weak. [6] Another gauge of financial stability is the distribution of systemic loss, which attempts to fill some of the gaps of the aforementioned measures. This measure ...
A primary theory in this vein is the debt deflation theory of Irving Fisher, which he proposed to explain the Great Depression. A more recent complementary theory is the Financial Instability Hypothesis of Hyman Minsky, and the credit theory of economic cycles is often associated with Post-Keynesian economics such as Steve Keen.
US federal minimum wage if it had kept pace with productivity. Also, the real minimum wage. Real macroeconomic output can be decomposed into a trend and a cyclical part, where the variance of the cyclical series derived from the filtering technique (e.g., the band-pass filter, or the most commonly used Hodrick–Prescott filter) serves as the primary measure of departure from economic stability.
When the failure of one particular financial institution threatens the stability of many other institutions, this is called systemic risk. [32] One widely cited example of contagion was the spread of the Thai crisis in 1997 to other countries like South Korea. However, economists often debate whether observing crises in many countries around ...
Modern monetary theory or modern money theory (MMT) is a heterodox [1] macroeconomic theory that describes currency as a public monopoly and unemployment as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires. [2]
The more general concept of a "Minsky cycle" consists of a repetitive chain of Minsky moments: a period of stability encourages risk taking, which leads to a period of instability when risks are realized as losses, which quickly exhausts participants into risk-averse trading (de-leveraging), restoring stability and setting up the next cycle.
In Marx's words, "The real barrier of capitalist production is capital itself". [40] The law of the falling rate of profit, the unexpected consequence of the profit motive, is described by Marx as a "two-faced law with the same causes for a decrease in the rate of profits and a simultaneous increase of the mass of profits". [41] "In short, the ...
Another recession came at the beginning of the 1990s as the result of a major stock collapse in October 1987, [176] referred to now as Black Monday. Although the collapse was larger than the one in 1929, the global economy recovered quickly, but North America still suffered a decline in lumbering savings and loans, which led to a crisis.