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.
Executive summary
The Bank for International Settlements published Working Paper 1381, 'Transformative AI and demand bottlenecks', on 12 October 2026. The 61-page paper is authored by Phurichai Rungcharoenkitkul, a principal economist in the BIS Monetary and Economic Department's Macroeconomic Analysis Unit. The…
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Source documents
https://www.bis.org/publications/working-paper-1381-transformative-ai-and-demand-bottlenecksRead by Regulus 15 Oct 2026 at 19:06 UTC
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