Artificial intelligence in central banking: benefits and risks of AI for central banks

Peterson Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: Artificial intelligence (AI) is a topic of interest in the finance literature. However, its role and implications for central banks have not received much attention in the literature. Using discourse analysis method, this article identifies the benefits and risks of artificial intelligence in central banking. The benefits of artificial intelligence for central banks are that deploying artificial intelligence systems will encourage central banks to develop information technology (IT) and data science capabilities, it will assist central banks in detecting financial stability risks, it will aid the search for granular micro economic/non-economic data from the internet so that the data can support central banks in making policy decisions, it enables the use of AI-generated synthetic data, and it enables task automation in central banking operations. However, the use of artificial intelligence in central banking poses some risks which include data privacy risk, the risk that using synthetic data could lead to false positives, high risk of embedded bias, difficulty of central banks to explain AI-based policy decisions, and cybersecurity risk. The article also offers some considerations for responsible use of artificial intelligence in central banking.

Keywords: central bank; artificial intelligence; financial stability; responsible AI; artificial intelligence model. (search for similar items in EconPapers)
JEL-codes: E51 E52 E58 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ban, nep-big, nep-cba, nep-cmp, nep-ict, nep-mon and nep-pay
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