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Do Markets Dream of Artificial Intelligence? Macroeconomic Effects and International Spillovers of AI News Shocks

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  • Maria Sole Pagliari

Abstract

This paper identifies AI news shocks from financial markets and traces their macroe-conomic effects in the United States and the euro area. We combine a daily equity factor based on differences in firms’ AI exposures with sign, magnitude, and narrative restrictions in a Bayesian VAR to isolate revisions in AI’s expected economic value. Monthly local projections reveal an investment-led adjustment in the US: capital-goods orders rise early and persistently, while aggregate activity responds more gradually and with greater uncertainty. Producer prices increase before consumer prices, and the expansion spreads from sectors closely connected to the AI production network to the broader economy. In the euro area, equity prices rise and the euro depreciates; import and energy costs feed into inflation before real activity strengthens. Inflation expectations and nominal rates also increase. The results highlight a monetary policy dilemma: financial spillovers and imported price pressures arrive before the broader productive gains from AI adoption.

Suggested Citation

  • Maria Sole Pagliari, 2026. "Do Markets Dream of Artificial Intelligence? Macroeconomic Effects and International Spillovers of AI News Shocks," Working Papers 871, DNB.
    • Handle: RePEc:dnb:dnbwpp:871
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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