The Macroeconomic Effects of AI Uncertainty

This paper examines the macroeconomic implications of uncertainty shocks related to artificial intelligence (AI). I construct a novel text-based AI Uncertainty (AIU) Index from newspaper coverage that displays sharp increases around notable AI developments and demonstrates limited correlation with established measures of economic uncertainty. Using an instrument that isolates the first- and second-moment effects of AI under SVAR-IV, I find that AI uncertainty shocks generate significant contractionary effects on equity prices, hours worked, and wages, with more limited effects on employment and output. Industry-level estimates, in turn, highlight heterogeneous adjustments along both the labour quantity and price margins. These findings indicate that AI uncertainty is a distinct driver of the business cycle, with a transmission mechanism that differs from that of conventional uncertainty shocks.