BIS paper warns AI growth could stall as automation thins the consumer demand that funds innovation
A BIS working paper models whether transformative AI can sustain high growth once large-scale automation shifts output toward investment and away from consumption. It matters because the author's calibrated model favours a far more muted outcome than recent transformative estimates, with direct implications for the natural rate of interest that central banks and treasury teams must price.
- Calibrated model identifies the 'demand bottleneck' scenario, where thinning consumer demand stalls AI progress, as empirically highly plausible.
- Transformative AI scenario reaches 5.5% growth after two decades; demand bottleneck falls below the pre-AI 2% rate as innovation permanently slows.
- Paper projects more moderate growth than recent studies such as Korinek et al. (2026) and highlights high uncertainty over the natural rate of interest.