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The impact of artificial intelligence on output and inflation

Author

Listed:
  • Aldasoro, Inaki
  • Doerr, Sebastian
  • Gambacorta, Leonardo
  • Rees, Daniel

Abstract

We construct an index of industry exposure to artificial intelligence (AI) to calibrate a macroeconomic multi-sector model. At the aggregate level, AI significantly raises output, consumption and investment in the short and long run. The inflation response depends on AI’s anticipated impact on productivity: When not anticipated, AI is initially disinflationary; when fully anticipated, inflation rises immediately. At the sectoral level, a sector’s initial AI exposure has little correlation with its long-term output increase. However, output grows by twice as much for the same increase in aggregate productivity when AI affects consumption rather than investment goods sectors, through sectoral linkages.

Suggested Citation

  • Aldasoro, Inaki & Doerr, Sebastian & Gambacorta, Leonardo & Rees, Daniel, 2024. "The impact of artificial intelligence on output and inflation," CEPR Discussion Papers 19604, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19604
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    File URL: https://cepr.org/publications/DP19604
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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