Minksian financial instability and the New Keynesian paradigm

Alexander Sawyer

Abstract

This paper contains a review of the main paradigmatic approach to general equilibrium macroeconomic modeling, the family of New Keynesian dynamic stochastic general equilibrium models, a review of the more obscure, but re cently somewhat resurgent, approach of Hyman Minsky and his Financial In stability Hypothesis, and a comparison of the two approaches. The paper then goes on to investigate the extent to which these approaches can be integrated, and to what effect.