The financial fragility hypothesis applied to the public sector: an analysis for Brazil's economy from 2000 to 2008

This paper builds on Hyman Minsky's financial fragility hypothesis to develop a financial fragility index for the public-sector financial structure. It applies the financial fragility index for the public-sector financial structure to analyze Brazil's public-sector financial structure from 2000 to 2008. The paper concludes that Brazil's financial structure was speculative during the 2000s. As a result, public debt increased during this period, and the public sector was unable to adopt countercyclical fiscal policies.