Financial fragility and crisis in an open economy: brief notes to adapt minskian approach to peripherical economies

Abstract

The aim of this article is to present in a clear and illustrative approach Minsky’s financial fragility hypothesis in an open economy. Traditional categories as hedge, speculative and Ponzi which were initially conceived as for a close economy, typically the US. For this, currency mismatch and endogenous movements in domestic risk must be taken into account. Regarding the later, is stablished that in an open economy financial disequilibrium are amplified in comparison with a close economy. Finally, from the policy maker perspective, reserve accumulation and capital controls are evaluated as a relevant and efficient tool in order to diminish foreign financial fragility.