Forecasting models based on machine learning (ML) algorithms have been shown to outperform traditional models in several applications. The lack of an easily interpretable functional form, however, is a major challenge for their adoption, especially when a knowledge of the estimated relationships...

We analyse the impact of macroeconomic and monetary policy shocks on corporate credit risk as measured by firms' probabilities of default (PDs) for the four largest euro area countries. We estimate the impact of shocks on one-year PDs using local projections (LP). For the period 2014-19, we find...