Detecting Ponzi Finance: An Evolutionary Approach to the Measure of Financial Fragility

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in ABSTRACTDifferent frameworks of analysis lead to different conceptions of financial instability and financial fragility. On one side, the static approach conceptualizes financial instability as an unfortunate byproduct of capitalism that results from unpredictable random forces that no one can do anything about except prepare for through adequate loss reserves, capital, and liquidation buffers. On the other side, the evolutionary approach conceptualizes financial instability as something that the current economic system invariably brings upon itself through internal market and nonmarket forces, and that requires change in financial practices rather than merely good financial buffers.This paper compares the two approaches in order to lay the foundation for the empirical analysis developed within the evolutionary approach. The paper shows that, with the use of macroeconomic data, it is possible to detect financial fragility, especially Ponzi finance. The methodology is applied to residential housing in the U.S. household sector and is able to capture some of the trends that are known to be sources of economic difficulties. Notably, the paper finds that Ponzi finance was going on in the housing sector from at least 2004 to 2007, which concurs with other works based on more detailed data.

Minsky's Financial Fragility: An Empirical Analysis of Electricity Distribution Companies in Brazil (2007715)

“…We are in line with Tymoigne (2010Tymoigne ( , 1718, which points out that: "a good analysis of financial fragility cannot be based only on macro data, but also must look in detail at which activities contribute to the fragilization of a sector." Therefore, our particular interest lies with authors that develop financial fragility indices at the firm and sectoral levels.…”

“…Some empirical studies employ the terms "financial fragility" or "financial instability," but are based on a theoretical framework that is very distinct from the one we built in the last section (Schroeder 2009;Tymoigne 2010). …”

“…The application of his concept of financial fragility and his evolutionary approach to financial crises, which sees them as the result of a progressive and endogenous increase in the fragilization of economic units, helped in illuminating the causes and operating mechanisms of the meltdown (Kregel 2008;Tymoigne 2010). …”

Minsky E a Fragilidade Financeira Das Distribuidoras Do Setor Elétrico Brasileiro

“…Esse autor buscou em várias oportunidades 8 formalizar algebricamente as condições que deveriam ser obedecidas pelas unidades econômicas em cada uma de suas classes de risco. Essa preocupação foi posteriormente retomada por Vercelli (2009), Tymoigne (20102014), Mulligan (2013), Nishi (2016) e Davis et al (2017).…”

“…Vercelli (2009) retrabalhou as equações desenvolvidas pelo próprio Minsky com o intuito de torná-las mais aderentes à realidade financeira decorrente da crise do subprime nos Estados Unidos. Tymoigne (2010) desenvolveu uma metodologia para identificar a presença de unidades Ponzi e a aplicou ao setor imobiliário americano pré-2008, posteriormente atualizando seu trabalho de modo a abarcar também as experiências dos setores imobiliários francês e britânico (TYMOIGNE, 2014). Mulligan (2013) classificou 8.707 empresas norte-americanas de capital aberto entre 2002 e 2009 segundo a taxonomia minskyana.…”