In light of the recent global financial crisis, the notion of financial fragility has become a cornerstone in current research programs of the dynamics of modern monetary production economies. This paper intends to contribute to the literature that focuses on the macroeconomic modelling of financial fragility drawing on Minsky’s theoretical framework. Our aim is to extend this literature whereby considerable emphasis has been placed on the fragility of firms, but much less attention has been paid to the fragility of banks and its impact on macroeconomic performance. The paper develops a simple macroeconomic model that links the fragility of banks with the level of output. We put forward a Minskyan categorization for the economy’s financial structure, which takes into account both the fragility of banks and the fragility of firms. Our analysis intends to illustrate under what conditions the interaction between banks and the real economy is likely to lead to financial structures that are susceptible to financial instability.
