LIST OF ABBREVIATIONS 7

LIST OF FIGURES 8

LIST OF TABLES 8

EXECUTIVE SUMMARY 9

1. ARTIFICIAL INTELLIGENCE: DEVELOPMENTS AND POLICY 10

2. A SYSTEMATIC APPROACH TO INCORPORATE AI-DRIVEN UNCERTAINTY 14

3. HOW AI IMPACTS THE MONETARY POLICY REACTION FUNCTION 16

  3.1. AI Impact on Productivity, Growth and the Output Gap 16

  3.2. AI Impact on Inflation, including Wages and Energy Costs 18

  3.3. AI Impact on the Equilibrium Real Interest Rate 20

4. CONSTRUCTING AI RISK SCENARIOS FOR MONETARY POLICY 23

5. POLICY RECOMMENDATIONS 26

6. CONCLUSIONS 31

REFERENCES 33

ANNEX 39