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An expanded conceptualisation of vulnerability to financial crises: Research on emerging markets

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  • Petric, Sebastian

Abstract

This paper develops a tripartite early warning framework for financial crises in emerging markets that separates (i) macro-financial conditions (fundamentals), (ii) policy choices (policy-induced factors), and (iii) slow-moving structural constraints (institutions). The framework formalises the crisis concept as elevated vulnerability interacting with a trigger and shows how fundamentals-only specifications can conflate conceptual levels, weakening coefficient interpretation and policy inference. I provide explicit placement rules, map each block to first-, second-, and third-generation crisis models, and construct block indices via principal component analysis (PCA) with a transparent residualisation procedure to isolate incremental policy and institutional information beyond fundamentals. The implication of the paper is a disciplined and interpretable decomposition of early warning predictors.

Suggested Citation

  • Petric, Sebastian, 2026. "An expanded conceptualisation of vulnerability to financial crises: Research on emerging markets," International Review of Economics & Finance, Elsevier, vol. 109(C).
    • Handle: RePEc:eee:reveco:v:109:y:2026:i:c:s1059056026005502
    DOI: 10.1016/j.iref.2026.105437
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