Structural change and financial instability in the US economy

The international financial crisis triggered by the 2007 subprime loan crisis in the US continues to casts a shadow over the world economy and has prompted renewed attention to the financial instability hypothesis proposed by the heterodox economist Hyman P. Minsky. This study presents a macrodynamic model that examines the structural changes and the instability of confidence affecting a dynamic system. We demonstrate that an unstable economic structure and a high instability of confidence make the system unstable. In addition, we conduct a vector autoregression (VAR) analysis to examine structural changes in the US economy, particularly in the late 1990s. Our analysis strongly indicates that the US economic structure has been transubstantiated since the late 1990s. The instability of confidence was very high after the subprime loan crisis and has directly affected investment since then.