Aggregate Effects of the Adoption of AI

Author

Andreas Hornstein

July 9, 2024

FEDERAL RESERVE RESEARCH: Richmond

AI is holding out the prospect of substantial productivity improvements. While the potential of AI may be large, it is uncertain how much of that potential will be realized and how fast it will occur. Recent estimates of the medium-term AI impact on labor productivity range from negligible to larger than the 1990s IT impact. But should AI meaningfully affect medium-term productivity growth, monetary policy is likely to respond by accommodating the increase in potential output. On the other hand, recalling the 1990s IT diffusion, one should not be too surprised that, even though AI is apparently everywhere, it hasn’t yet noticeably improved one’s experience with chatbots.

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