SFeDu
of.211, Gorgoko St., 88 
Rostov-on-Don
Russia
344002
+7 (863) 250-59-54
This email address is being protected from spambots. You need JavaScript enabled to view it.
te@sfedu.ru

TERRA ECONOMICUS

  • Home
  • Issues
  • 2022
  • No 1
  • An analysis of the French non-financial private sector based on the Financial Instability Hypothesis

An analysis of the French non-financial private sector based on the Financial Instability Hypothesis


TERRA ECONOMICUS, , Vol. 20 (no. 1),

The article analyzes the dynamics of the financial fragility of French private non-financial firms using the Financial Instability Hypothesis developed by Hyman Philip Minsky. This hypothesis contains analytical tools to explore the relationship between the course of the business cycle and the dynamics of the structure of private firms’ financial flows. Our sample includes 208 private sector enterprises in France. The study covers time period from 1998 to 2018. The source of data is the Thomson Reuters platform. Related indicators are considered separately for three categories of companies depending on the size of their revenue – small, medium and large businesses – and for ten categories of companies depending on their industry affiliation. Three criteria are used to classify the companies into hedge firms, firms with speculative financing and Ponzi firms. Our empirical analysis showed that before the onset of the Great Recession in the French economy, the share of Ponzi firms grew, and reached its maximum at the peak of economic hardship. In line with the Financial Instability Hypothesis, the research findings confirm that the accumulation of financial fragility is associated with the onset of the Great Recession in France. It is further shown that small firms are much more financially fragile compared to medium and large businesses, and the real estate sector turned out to be the most financially fragile sector of the French economy.
Citation: Rozmainsky I., Mindubaeva K., Yakovleva E. (2022). An analysis of the French non-financial private sector based on the Financial Instability Hypothesis. Terra Economicus 20(1): 6–26. DOI: 10.18522/2073-6606-2022-20-1-6-26


Keywords: Financial Instability Hypothesis; Minsky; financial fragility; Great Recession; European debt crisis; austerity policy; France

JEL codes: E12, E32, E44, E52

References:
  • Бешенов С.В., Розмаинский И.В. (2015). Гипотеза финансовой нестабильности Хаймана Мински и долговой кризис в Греции. Вопросыэкономики (11): 120–143. [Beshenov S., Rozmainsky I. (2015). Hyman Minsky’s financial instability hypothesis and the Greek debt crisis. Voprosy Ekonomiki (11): 120–143 (in Russian).]
  • Захарова Н.В., Лабудин А.В. (2017). Малое и среднее предпринимательство в Европейских странах: основные тенденции развития. Управленческое консультирование (12): 64–77. [Zakharova N., Labudin A. (2017). Small & medium entrepreneurship in European countries: Main tendencies of the development. Administrative Consulting (12): 64–77 (in Russian).]
  • Невская Н.А. (2019). Новый этап промышленной политики Франции. ЦИТИСЭ ( 3 ) : 1–13. [Nevskaya N. (2019). A new stage in the industrial policy of France. CITISE (3): 1–13 (in Russian).]
  • Новикова А.Ю., Розмаинский И.В. (2020). Сектор нефинансовых частных фирм Португалии в 2001–2017 годах: анализ на основе гипотезы финансовой хрупкости. Вопросы экономики (3): 115–128. [Novikova A., Rozmainsky I. (2020). The non-financial private firms’ sector of Portugal in 2001–2017: The financial fragility hypothesis-based analysis. Voprosy Ekonomiki (3): 115–128 (in Russian).]
  • Розмаинский И.В. (2009). Вклад Х.Ф. Мински в экономическую теорию и основные причины кризисов в позднеиндустриальной денежной экономике. Terra Economicus 7(1): 31–42. [Rozmainsky I. (2009). Minsky’s contribution to the economic theory and major causes of crises in late industrial monetary economy. Terra Economicus 7(1): 31–42 (in Russian).]
  • Розмаинский И.В., Селицкий М.С. (2021). Подтверждение гипотезы финансовой нестабильности на данных частных фирм Южной Кореи. Журнал экономической теории 18(3): 417–432. [Rozmainsky I., Selitsky M. (2021). The financial instability hypothesis and the case of private non-financial firms in South Korea. Zhurnal Ekonomicheskoj Teorii [Russian Journal of Economic Theory] 18(3): 417–432 (in Russian).]
  • Argitis G., Nikolaidi M. (2014). The financial fragility and the crisis of the Greek government sector. International Review of Applied Economics 28(3): 274–292.
  • Bryleva E., Rozmainsky I. (2022). The non-financial private firms’ sector of Spain in 2011–2017: The financial fragility hypothesis-based analysis. International Review of Applied Economics. DOI: 10.1080/02692171.2022.2026300
  • Budnevich Portales C., Favreau Negront N., Caldentey E. (2021). Chile’s thrust towards financial fragility. Investigacion Economica 80(315): 81–106.
  • Caldentey E., Favreau-Negront N., Lobos L. (2019). Corporate debt in Latin America and its macroeconomic implications. Journal of Post Keynesian Economics 42(3): 335–362.
  • Davis L., De Souza J., Hernandez G. (2019). An empirical analysis of Minsky regimes in the US economy. Cambridge Journal of Economics 43(3): 541–584.
  • Minsky H. (1986). Stabilizing an unstable economy. Yale University Press.
  • Minsky H. (1992). The financial instability hypothesis. Levy Economics Institute Working Papers, 74.
  • Minsky H. (2016). Can It Happen Again? Essay on Instability and Finance. Routledge.
  • Mulligan R. (2013). A sectoral analysis of financial instability hypothesis. The Quarterly Review of Economics and Finance 53(4): 450–459.
  • Mulligan R., Lirely R., Coffee D. (2014). An empirical examination of Minsky’s financial instability hypothesis. Journal des Economistes et des Etudes Humaines 20(1): 1–17.
  • Nishi H. (2019). An empirical contribution to Minsky’s financial fragility: Evidence from nonfinancial sectors in Japan. Cambridge Journal of Economics 43(3): 585–622.
  • Rozmainsky I., Kovezina Yu., Klimenko A. (2021). An empirical application of the financial instability hypothesis based on data from the Dutch non-financial private sector. Journal of Post Keynesian Economics. DOI: 10.1080/01603477.2021.1993072
  • Rozmainsky I., Rodionova T. (2021). The financial fragility hypothesis and the debt crisis in Italy in the 2010s. Terra Economicus 19(1): 6–16.
  • Schroeder S. (2009). Defining and detecting financial fragility: New Zealand’s experience. International Journal of Social Economics 36(3): 287–307.
  • Tori D., Onaran O. (2018). The effects of financialization on investment: evidence from firm-level data for the UK. Cambridge Journal of Economics 42(5): 1393–1416.
  • Torres Filho E., Martins N., Miaguti C. (2019). Minsky’s financial fragility: An empirical analysis of electricity distribution companies in Brazil (2007–15). Journal of Post Keynesian Economics 42(1): 144–168.
  • Whalen C. (2008). The credit crunch: A Minsky moment. Studi e Note di Economia, 13(1): 3–21.
Publisher: Southern Federal University
Founder: Southern Federal University
ISSN: 2073-6606