The Financial Fragility of Complex Economies

ABSTRACT This paper provides an early warning exercise suggesting that in complex economies characterized by the production of knowledge‐intensive products, financial crises are more frequent, even after considering standard predictors of crises. I relate findings to standard contributions in development theory linking economic growth to the structural transformation of the economy. In this perspective, I argue that while transitioning from a simple to a more complex productive structure can promote economic growth, it can also increase financial instability.