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Machine Learning the Macroeconomic Effects of Financial Shocks

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  • Niko Hauzenberger
  • Florian Huber
  • Karin Klieber
  • Massimiliano Marcellino

Abstract

We propose a method to learn the nonlinear impulse responses to structural shocks using neural networks, and apply it to uncover the effects of US financial shocks. The results reveal substantial asymmetries with respect to the sign of the shock. Adverse financial shocks have powerful effects on the US economy, while benign shocks trigger much smaller reactions. Instead, with respect to the size of the shocks, we find no discernible asymmetries.

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  • Niko Hauzenberger & Florian Huber & Karin Klieber & Massimiliano Marcellino, 2024. "Machine Learning the Macroeconomic Effects of Financial Shocks," Papers 2412.07649, arXiv.org.
    • Handle: RePEc:arx:papers:2412.07649
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    1. Kastner, Gregor & Frühwirth-Schnatter, Sylvia, 2014. "Ancillarity-sufficiency interweaving strategy (ASIS) for boosting MCMC estimation of stochastic volatility models," Computational Statistics & Data Analysis, Elsevier, vol. 76(C), pages 408-423.
    2. Hauzenberger, Niko & Huber, Florian & Klieber, Karin & Marcellino, Massimiliano, 2025. "Bayesian neural networks for macroeconomic analysis," Journal of Econometrics, Elsevier, vol. 249(PC).
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    Cited by:

    1. Philippe Goulet Coulombe & Karin Klieber, 2025. "Opening the Black Box of Local Projections," Papers 2505.12422, arXiv.org.

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    More about this item

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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