Artificial intelligence reshapes productivity and monetary policy

The presentation begins by noting a general slowdown in productivity growth, both in Norway and among its trading partners, since the early 2000s.

While Norway has seen relatively weak manufacturing productivity, this has been largely compensated by strong growth in the services sector.

Artificial intelligence is identified as a key factor that could reverse this trend.

Norges Bank's Regional Network survey indicates that enterprises expect AI to have a positive impact on turnover and profitability, though its effect on the need for labor and new skills shows more divergence.

Estimates for AI-driven labor productivity growth over the next ten years vary significantly, with some projections suggesting substantial increases, while others remain more conservative.

The central bank emphasizes the importance of understanding these dynamics, as productivity growth is a fundamental driver of long-term economic prosperity and a crucial input for monetary policy considerations.

Norges Bank's analysis explores how monetary policy responds to productivity shocks.

A permanent, unanticipated productivity shock would typically lead the central bank to lower the policy rate to stabilize inflation and the output gap.

Conversely, an *expected* future productivity shock can affect the economy immediately, driving up investment and consumption due to anticipation of higher future growth.

In this scenario, monetary policy might respond with a higher policy rate in the near term to manage potential inflationary pressures from increased demand.

The presentation also notes that AI and new technologies can enhance monetary policy operations by improving model development, facilitating the analysis of large datasets, and enabling more tailored communication strategies for diverse audiences.