This is according to an International Monetary Fund (IMF) study released on Friday.
The research highlights how the scale and integration of ICT investment into production, especially when driven by generative AI adoption, affects key macroeconomic indicators, including output, inflation, and the natural rate of interest.
Using a modified dynamic stochastic general equilibrium framework, the paper introduces a distinct ICT capital channel and its interaction with labour, allowing a detailed mapping of improvements in ICT investment efficiency into broader economic outcomes.
- Historical data suggests moderate substitutability between ICT capital and labour.
- Counterfactual simulations reveal that the impact of ICT investment shocks depends critically on the elasticity of substitution between labour and ICT capital, affecting investment dynamics, real wages, and the natural rate of interest.
- Scenarios based on conservative and ambitious AI adoption indicate that ICT investment could raise annual GDP growth by 0.1–0.9 percentage points, inflation by 0.1–0.8 percentage points, and the natural rate of interest by up to 0.7 percentage points. The effects differ depending on whether ICT and labour are complementary or substitutable: strong complementarity amplifies inflation and lifts the natural rate, while strong substitutability produces the opposite effect.
From a monetary policy perspective, the study emphasises that the interaction between new AI-driven capital and labour market conditions will be crucial in shaping inflation dynamics and setting the appropriate level of the natural rate of interest.
Policymakers who misjudge this structural relationship risk either falling behind a rising natural rate or unnecessarily restraining economic activity if AI reduces labour demand.
The authors suggest future research should explore international spillovers, firm-level heterogeneity in AI adoption, and coordinated fiscal measures to ease the transition to an AI-intensive production landscape.
–IMF/ChannelAfrica–
