Financial Instability: Theoretical Aspects and Its Causes

Abstract

Economic fluctuations are in close attention of scientists - economists. The institution that provokes the «thirst» for speculation and causes external shocks is the central bank. The «anarchy of production» by K. Marx, as an integral part of the unplanned economy, becomes the reason for the creation of production «disproportions». The research examined the causes of economic fluctuations, used the approaches of different scientific schools in the study of financial instability. It was determined that H. Minsky developed the «financial theory of investments and the investment theory of the cycle», synthesized the financial factors of development with the real factors of the occurrence of the cycle, which are ultimately reflected in the balance sheet of the enterprise. It was revealed that Minsky, in his theory of financial instability, established that over a certain period, the development of an economy with a «stable» financial structure, where hedging prevails, naturally moves to an economy with a «fragile» financial structure, dominated by speculation and even Ponzi schemes.