Institutional supercycles: an evolutionary macro-finance approach

Dafermos, Yannis; Gabor, Daniela; Michell, Jo

Abstract

We build upon the Minskyan concepts of ‘thwarting mechanisms’ and ‘supercycles’ to develop a framework for the analysis of the dynamic evolutionary interactions between macrofinancial, institutional and political processes. Thwarting mechanisms are institutional structures that aim to stabilise the macrofinancial system. The effectiveness of such structures changes over time, creating a secular cyclical pattern in capitalism: the supercycle. We develop a macrofinancial stability index and identify two supercycles in the post-war period, which we label the industrial and financial globalisation supercycle respectively. For each, we apply a four-phase classification system, based on the effectiveness of institutions, customs and political structures for stabilising the macrofinancial system. The supercycles framework can be used to explain and anticipate macroeconomic, financial and thus political developments, and moves beyond conventional approaches in which such developments are treated as exogenous shocks.

Citation

Dafermos, Y., Gabor, D., & Michell, J. Institutional supercycles: an evolutionary macro-finance approach. London

• Working Paper Type: Working Paper
• Deposit Date: Jan 4, 2021
• Publicly Available Date: Jan 4, 2021
• Pages: 1-29
• Keywords: Minsky, thwarting mechanisms, supercycles, shadow banking, globalisation, macrofinancial stability