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Minsky's Financial Fragility: An Empirical Analysis of Electricity Distribution Companies in Brazil (2007-15)

Author

Listed:
  • Ernani Teixeira Torres Filho
  • Norberto Montani Martins
  • Caroline Yukari Miaguti

Abstract

The present paper applies Hyman P. Minsky's insights on financial fragility in order to analyze the behavior of electricity distribution companies in Brazil from 2007 to 2015. More specifically, it builds an analytical framework to classify the firms operating in this sector into Minskyan risk categories and assess how financial fragility evolved over time, in each firm and in the sector as a whole. This work adapts Minsky's financial fragility indicators and taxonomy to the conditions of the electricity distribution sector and applies them to regulatory accounting data for more than 60 firms. This empirical application of Minsky's theory for analyzing firms engaged in the provision of public goods and services is a novelty. The results show an increase in the financial fragility of those firms (as well as the sector) throughout the period, especially between 2008 and 2013, even though the number of firms operating at the highest level of financial risk hardly changed.

Suggested Citation

  • Ernani Teixeira Torres Filho & Norberto Montani Martins & Caroline Yukari Miaguti, 2017. "Minsky's Financial Fragility: An Empirical Analysis of Electricity Distribution Companies in Brazil (2007-15)," Economics Working Paper Archive wp_896, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_896
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 215-268, November.
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    3. Leila E Davis & Joao Paulo A de Souza & Gonzalo Hernandez, 2019. "An empirical analysis of Minsky regimes in the US economy," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 43(3), pages 541-583.
    4. Hiroshi Nishi, 2019. "An empirical contribution to Minsky’s financial fragility: evidence from non-financial sectors in Japan," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 43(3), pages 585-622.
    5. Amitava Krishna Dutt (ed.), 2003. "Development Economics and Structuralist Macroeconomics," Books, Edward Elgar Publishing, number 2658.
    6. Susan Schroeder, 2009. "Defining and detecting financial fragility: New Zealand's experience," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 36(3), pages 287-307, February.
    7. Mulligan, Robert F., 2013. "A sectoral analysis of the financial instability hypothesis," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(4), pages 450-459.
    8. Eric Tymoigne, 2012. "Financial fragility," Chapters, in: Jan Toporowski & Jo Michell (ed.), Handbook of Critical Issues in Finance, chapter 14, pages i-ii, Edward Elgar Publishing.
    9. Eric Tymoigne, 2010. "Detecting Ponzi Finance: An Evolutionary Approach to the Measure of Financial Fragility," Economics Working Paper Archive wp_605, Levy Economics Institute.
    10. Mario Seccareccia, 1988. "Systemic Viability and Credit Crunches: An Examination of Recent Canadian Cyclical Fluctuations," Journal of Economic Issues, Taylor & Francis Journals, vol. 22(1), pages 49-77, March.
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    Cited by:

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    More about this item

    Keywords

    Minsky; Financial Fragility; Financial Instability Hypothesis; Electricity Distribution Companies;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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