ABSTRACT

This paper examines the macroeconomic effects of uncertainty surrounding artificial intelligence (Al) using a novel text-based Al Uncertainty Index. Al uncertainty shocks are identified in an SVAR using an external instrument constructed from positive residual movements in the index, after controlling for broader economic news about Al. Focusing on the US economy, the results show that an increase in Al uncertainty generates contractionary effects concentrated in equity prices, wages, and hours worked, while employment and industrial production display muted responses. This transmission pattern differs from conventional uncertainty shocks, which produce broader contractions in employment and real activity. Al uncertainty may operate through an automation threat. A more valuable option to automate strengthens the bargaining position of firms and lowers wages before adoption occurs. Industry-level estimates reveal heterogeneous labour market adjustments across industries related to differences in Al exposure.