Predicting Financial Crises Myth and Reality – Mahfoud DJEBBAR

modern finance, especially in recent years. The aim of this article is not to build a new model

able to anticipate or provide some early warning signals for those crises, but to overview the

existing body of literature in an attempt to show the predictive power of EWSs used. After a

comparison between financial crises and financial stability, we proceed to detailed analysis

of different financial crises, their indicators, triggers, and implications. We conclude with an

assessment of the effectiveness of the EWSs utilized by different bodies and institutions in

predicting financial turbulences. The final result is that financial crises are unpredictable and

always take market participants and policymakers by surprise. These people continually ask

themselves “why didn’t they think of this earlier?” These are the limits of financial

engineering (securitization) in a world of financial globalization.