Artificial intelligence and financial crises

Jon Danielsson and Andreas Uthemann

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Abstract: The rapid adoption of artificial intelligence (AI) poses new and poorly understood threats to financial stability. We use a game-theoretic model to analyse the stability impact of AI, finding it amplifies existing financial system vulnerabilities - leverage, liquidity stress and opacity - through superior information processing, common data, speed and strategic complementarities. The consequence is crises become faster and more severe, where the likelihood of a crisis is directly affected by how effectively the authorities engage with AI. In response, we propose the authorities develop their own AI systems and expertise, set up direct AI-to-AI communication, implement automated crisis facilities and monitor AI use.

Date: 2024-07, Revised 2025-05
New Economics Papers: this item is included in nep-ain, nep-cmp, nep-fdg and nep-rmg
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