Debt Burden, Wealth and Confidence

Abstract

The global financial crisis, triggered by the 2008 subprime mortgage crisis in the US, indicates that financial factors are a significant cause for economic instability. This crisis represents a point of a departure for this study, which addresses the issues of financial instability, cycles and the fragility of the financial structure. We construct macrodynamic models of financial instability, which include debt burdens, wealth accumulation, states of “euphoria” and the instability of confidence.