Artificial Intelligence (AI), financial market and economic growth: A simple theoretical model

Thiédjé Gaudens-Omer Kouakou ()
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Thiédjé Gaudens-Omer Kouakou: University Alassane Ouattara

Economics Bulletin, 2025, vol. 45, issue 3, 1297 - 1307

Abstract: In this paper, we develop a theoretical model analyzing the role of financial development in the AI-economic growth nexus. Our theoretical framework is inspired by that of Zeira (1998) and Aghion et al. (2017), each articulated with that of Pagano (1993. The results show that AI affects economic growth through two channels: direct effects on the final product market via the productivity of automated tasks, indirect effects via financial market imperfections. In case of strong financial development, AI positively affects economic growth. But in case of weak financial development, AI can reduce economic growth. Taking the financial market into account thus avoids underestimating or overestimating the effect of AI on economic growth. In addition to labor market and education system reforms, our study recommends financial reforms that can improve financial development and more effectively allocate investments to finance AI. More specifically, African countries must invest in AI, holistically, in order to increase their shares in the global AI market.

Keywords: Artificial intelligence; economic growth; financial development (search for similar items in EconPapers)
JEL-codes: O3 O4 (search for similar items in EconPapers)
Date: 2025-09-30
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