IMPACT OF ARTIFICIAL INTELLIGENCE ON OUTPUT AND INFLATION IN NIGERIA: A MONETARY POLICY ANALYSIS
Mukhtar Musa Yahaya and Naima Bashir Ado
Volume 14 Issue 1
Abstract
This study aims to bridge the gap in the literature by providing a comprehensive analysis of the effects of AI adoption on output growth and inflation in Nigeria. AI makes impact in three core parameters of monetary policy such as; potential output as a due to driven of TFP growth, the slope of the Phillips Curve may flatten as AI improves price flexibility and competition, AI-powered financial markets react faster to MPR signals. The study concludes that artificial intelligence is not neutral for monetary policy in Nigeria, it acts as a supply-side technology that raises potential output and exerts downward pressure on inflation in the long run, but creates short-run inflationary frictions during the investment phase, the study recommends that there should be an upgrade forecasting toolkit by developing ML and AI nowcasting models using high-frequency data from NIBSS, POS transactions, and satellite imagery to track AI’s real-time impact on output and prices, there should be a recalibration of neutral rate there by Incorporating AI-driven productivity into estimates of r. Current analysis suggests neutral MPR may be 25–50bps higher than pre-AI era. There should be communication strategy by providing forward guidance on how CBN views AI shocks to anchor expectations. Faster transmission means market Keywords: Artificial Intelligence, Inflation, Output, Monetary Policy
Download Paper