INTERPRETATIONS OF FINANCIAL INSTABILITY IN POST-KEYNESIAN ECONOMICS

Having escaped the Great Depression, capitalism of the second half of the 20th century proved its extraordinary survivability. The belief in infinite possibilities of effective financial markets together with governmental monetary policies have created an illusion that serious crises have been eliminated. Yet, such belief was lost due to the latest global financial crisis of 2008. Macroeconomists must admit that real financial markets are far from perfect and are often affected by far-reaching delusions and mayhem of mob. This article studies theories of post-Keynesian economists, who elucidated the causes of financial instability. Without understanding of how financial crises develop they will inevitably continue to emerge.