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Artificial intelligence and inflation in the EU

Author

Listed:
  • Borowski, Jakub
  • Fidrmuc, Jarko
  • Jaworski, Krystian

Abstract

We investigate the influence of artificial intelligence adoption on producer price inflation across economic sectors within the European Union. We show that AI diffusion is associated with reduced inflationary pressures, with effects most statistically significant in services and the Eurozone. A 10–percentage-point increase in the share of firms employing AI corresponds, on average, to a 0.3–0.6 percentage-point decline in inflation. The association between AI adoption and inflation is nonlinear. The deflationary impact on prices is more pronounced in AI-intensive sectors. Overall, the findings suggest that the integration of AI technologies constitutes a structural force dampening inflation.

Suggested Citation

  • Borowski, Jakub & Fidrmuc, Jarko & Jaworski, Krystian, 2025. "Artificial intelligence and inflation in the EU," Economics Letters, Elsevier, vol. 257(C).
    • Handle: RePEc:eee:ecolet:v:257:y:2025:i:c:s0165176525004756
    DOI: 10.1016/j.econlet.2025.112638
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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