The Macroeconomic Effects of AI Uncertainty

Working Paper

Juan Rufino M. Reyes
ESCoE Discussion Paper No. 2026-02, King's College London, Economic Statistics Centre of Excellence, 2026 Feb

Cite

APA Click to copy
Reyes, J. R. M. (2026). The Macroeconomic Effects of AI Uncertainty. ESCoE Discussion Paper No. 2026-02. Economic Statistics Centre of Excellence.

Chicago/Turabian Click to copy
Reyes, Juan Rufino M. The Macroeconomic Effects of AI Uncertainty. ESCoE Discussion Paper No. 2026-02. Economic Statistics Centre of Excellence, February 2026.

MLA Click to copy
Reyes, Juan Rufino M. “The Macroeconomic Effects of AI Uncertainty.” ESCoE Discussion Paper No. 2026-02, Economic Statistics Centre of Excellence, Feb. 2026.

BibTeX Click to copy

@techreport{juan2026a,
  title = {The Macroeconomic Effects of AI Uncertainty},
  year = {2026},
  month = feb,
  institution = {Economic Statistics Centre of Excellence},
  journal = {ESCoE Discussion Paper No. 2026-02},
  school = {King's College London},
  author = {Reyes, Juan Rufino M.},
  month_numeric = {2}
}

[Latest Version] [Supplemental Appendix] [ESCoE Discussion Paper]
[ESCoE Webinar] [Slides]

[Picture]

AI Uncertainty (AIU) Index, M1:2016-M4:2025 (3 Month Moving Avg.)

This paper examines the macroeconomic implications of uncertainty shocks related to artificial intelligence (AI) through a novel text-based AI Uncertainty (AIU) Index. I identify AI uncertainty shocks using an SVAR with an external instrument that isolates first- and second-moment coverage of AI. The results indicate that an increase in AI uncertainty generates contractionary effects concentrated in equity prices, wages, and hours worked, while employment and industrial production remain largely unaffected. This transmission pattern differs from that of conventional uncertainty shocks, which produce broader movements across macroeconomic aggregates. Industry-level estimates reveal heterogeneous labour market adjustments, with industries more exposed to AI showing stronger responses. The findings characterise AI uncertainty as a distinct macroeconomic shock whose effects concentrate in wage compression and intensive-margin labour adjustment.

[YouTube video]

Presented at the following conferences and seminars:

2025 King's Business School (KBS) Doctoral Symposium
2025 Warwick Business School (WBS) PhD Workshop on Fintech
2025 ESCoE Researcher Workshop
ESCOE Economic Measurement Webinar
4th UK Digital Economics Workshop
2025 UNSW-ESCoE Conference on Economic Measurement
ESCoE Conference on Economic Measurement 2026* (Forthcoming)
8th Queen Mary University of London (QMUL) Economics and Finance Workshop (Forthcoming)
Royal Economic Society 2026 Annual Conference (Forthcoming)
International Association for Applied Econometrics (IAAE) 2026 Annual Conference (Forthcoming)

* Poster Presentation

Suggested Citation:

Reyes, J. (2026). The Macroeconomic Effects of AI Uncertainty. Economic Statistics Centre of Excellence (ESCoE) Discussion Paper 2026-02, Available at SSRN: https://ssrn.com/abstract=6233958 or http://dx.doi.org/10.2139/ssrn.6233958