The Oesterreichische Nationalbank (OeNB) is funding a research project by Florian Huber at the Department of Economics entitled “Exploring the Macro-to-Micro Propagation of Aggregate Shocks: The Role of Nonlinearities and Heterogeneity” with a total budget of nearly EUR 300,000. Congratulations, Florian!

The steadily growing availability of large-scale micro-level datasets opens up new opportunities to analyze economic processes at an unprecedented level of detail. At the same time, this development poses the challenge of consistently integrating these rich sources of information into a unified modeling framework that is compatible with aggregate macroeconomic time series, in order to adequately capture economy-wide dynamics and to study the effects of macroeconomic shocks at the micro level.

Against this background, the project examines how aggregate economic shocks — such as oil price shocks, monetary policy shocks, or uncertainty shocks —are transmitted to microeconomic units and the economy as a whole. While many established econometric models assume linear relationships and thus symmetric responses, empirical evidence increasingly suggests that adjustment processes are often nonlinear and asymmetric. The project therefore develops novel modeling approaches that allow for a systematic identification of such nonlinear effects. To this end, modern machine learning methods are employed, offering a high degree of flexibility without requiring restrictive assumptions about the specific form of potential nonlinearities.

Another central focus of the project is the explicit consideration of heterogeneity among microeconomic units. This makes it possible to investigate how aggregate economic shocks affect households, firms, or other economic agents differently depending on their specific characteristics. The results contribute to a deeper understanding of the interactions between the micro and macro levels and provide valuable insights for empirical economic research as well as for economic policy analysis.

The project is conducted in close collaboration with international partner institutions, including central banks such as the Federal Reserve Bank (USA) and the European Central Bank, as well as renowned universities such as Bocconi University (Italy), the University of Notre Dame (USA), and Johns Hopkins University (USA).