Macroeconomic Policies for Productivity Growth

Rapid advances in artificial intelligence and renewable energy technologies may boost productivity growth over the coming years, but also cause a disruptive reallocation of economic activity among workers, firms, sectors and countries.

How should monetary and fiscal policies be designed to ensure that these new technologies deliver productivity improvements and widespread welfare gains?

In this proposal, I will address this fundamental question by developing a Keynesian growth framework – i.e. a unified theory of business cycles and growth – in which macroeconomic policies traditionally associated with aggregate demand management, such as monetary and cyclical fiscal policies, affect firms’ investment in new technologies and productivity.

In part I, I will develop a novel Keynesian growth model with multiple alternative technologies (e.g. human labor vs. artificial intelligence, dirty vs. clean energy), and realistic heterogeneity among households, firms and sectors.

The framework will shed light on the trade-offs faced by central banks during the energy transition, on the macroeconomic policies needed to prevent the spread of artificial intelligence from causing technological unemployment, and on the macroeconomic management of the sectoral reallocation process driven by accelerations in technological change.In part II, I will provide an open economy Keynesian growth model to study the interactions between capital flows, productivity growth and macroeconomic policies.

I will use the framework to explain why the inception of the euro has fostered capital mobility, but not yet productivity convergence among member countries, to explore the impact of US monetary and fiscal policies on international value chains and global productivity, and to investigate the dual role played by the United States as center of the international monetary and technological systems.