Discussion paper
DP19604 The impact of artificial intelligence on output and inflation
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.
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