Researchers at the the University of Birmingham have developed an early warning system that could help policymakers take action to avert or mitigate the impact of financial crisis. “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,” University of Birmingham said in statement, quoting Dr Frank Strobel who is a senior lecturer of Economics at the University.
Noting that until recently, early warning systems focussed on factors relating only to developing countries, the statement said,”Birmingham’s development takes account of the causes and associated indicators of sovereign debt crises varying between different countries and regions.”
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, 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, the statement said.