Monetary policy in the age of automation

Fornaro, Luca; Wolf, Martin

Monetary policy in the age of automation

License

Citation

Fornaro, L, Wolf, M. Monetary policy in the age of automation. 2021. handle: http://hdl.handle.net/10230/68652

This citation was generated automatically.

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.