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

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.