One of the aspects the crisis literature has explored
is that of prediction. Early warning models were developed in the aftermath of the emerging market crises of
the 1990s. But interest in them soon began to fade, driven
in part by a combination of inherent difficulty in predicting crises, particularly the timing of financial crises. This
interest was renewed after the global financial crisis.
Broadly speaking, there are three main ingredients in
an early warning model: the crisis definition (what is it
that it is trying to predict), the list of explanatory indicator variables, and the approach through which the information in those indicators is combined to predict crises