Birmingham’s early warning system flags global financial crises

From www.eurekalert.com

University of Birmingham

Researchers at the University of Birmingham have developed a new 'early warning system' that could help policymakers around the world take action to avert or lessen the impact of financial crisis.

Existing prediction systems failed to forecast the global crash of 2008, which led to several governments bailing out their banks and European nations, such as Greece, Portugal, Ireland and Spain, being plunged into a sovereign debt crisis.

Birmingham business experts have now developed a system which takes into account the differences between developed and developing countries. This has produced a more accurate set of indicators that warn of impending fiscal catastrophe.

Dr Frank Strobel, Senior Lecturer in Economics, said: "We have developed a new type of 'early warning system' that will provide more accurate predictions of sovereign debt crises and how long they are likely to last.

"Financial monitoring tools that can forewarn the build-up of major financial turmoil are increasingly important. Our system provides policymakers with time to take corrective action that would help avert, or at least mitigate, the damage associated with an approaching crisis."

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