Minsky's financial instability hypothesis

Since the Global Financial Crisis, Minsky’s Financial Instability Hypothesis (FIH) has been receiving a growing attention in macroeconomic analyses and policy making. In this contribution I discuss the key dimensions and extensions of Minsky’s FIH, focusing on how Minskyan frameworks have analysed the drivers of endogenous instability and cycles associated with corporate, household and external debt. I cover recent theoretical and empirical developments in the Minskyan literature and emphasise the unique evolutionary macrofinancial aspects of Minsky’s approach. I also analyse the policy implications of Minsky’s FIH and explain how Minsky’s analysis can be used for our understanding of climate-induced financial instability, in light of the recent developments in the area of climate-related financial risks