It Matters Who Gets Automated: Monetary Policy in an AI Economy

Alina Ermolaeva and Hannah Magdalena Seidl

No 2184, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Does artificial intelligence (AI) change the transmission of monetary policy? We develop a two-sector heterogeneous-agent New Keynesian model with task-based production, in which AI automates part of the work in one exposed sector and leaves the other shielded. In the AI steady state, the economy holds more capital, and labor income shifts from the exposed workers, who lose through hours, to the shielded workers, who gain through higher wages. We then compare the same rate cut across the two economies. It stimulates macroeconomic aggregates more in the AI economy. The deeper capital stock delivers a larger initial stimulus. Investment responds as strongly as without AI, but on a permanently larger base, so the same response means more demand. Machines absorb part of the exposed sector’s share of that demand. The shielded sector’s share becomes labor income, which is spent in turn. It matters who gets automated: the amplification of monetary policy in an AI economy runs through the workers AI does not replace.

Keywords: Artificial intelligence; automation; task-based production; HANK; monetary transmission; labor share; sectoral incidence (search for similar items in EconPapers)
JEL-codes: E21 E24 E32 E52 J23 O33 (search for similar items in EconPapers)
Pages: 31 p.
Date: 2026
New Economics Papers: this item is included in nep-ain, nep-cba, nep-dge and nep-mon
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.diw.de/documents/publikationen/73/diw_01.c.1022699.de/dp2184.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp2184

Access Statistics for this paper

More papers in Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Bibliothek ().