Monetary policy in the age of automation

Luca Fornaro and Martin Wolf

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We provide a framework in which monetary policy affects firms' automation decisions (i.e. how intensively capital and labor are used in production). This new feature has far-reaching consequences for monetary policy. Monetary tightenings may depress firms' use of automation technologies and labor productivity, even permanently, while having a transitory impact on inflation and employment. A protracted period of weak demand might translate into less investment and de-automation, rather than into deflation and involuntary unemployment. Technological advances that increase the scope for automation may give rise to persistent unemployment, unless they are accompanied by expansionary macroeconomic policies.

Keywords: monetary policy; automation; fiscal expansions; hysteresis; liquidity traps; secular stagnation; endogenous productivity; wages (search for similar items in EconPapers)
JEL-codes: E32 E43 E52 O31 O42 (search for similar items in EconPapers)
Date: 2021-07, Revised 2022-09
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Monetary Policy in the Age of Automation (2021)
Working Paper: Monetary Policy in the Age of Automation (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1794

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