Singapore’s Central Bank Discusses the Role of AI in Policy Development
In a recent speech at the 2024 Advanced Workshop for Central Bankers, Edward S Robinson, the deputy managing director for economic policy and chief economist at the Monetary Authority of Singapore, shared his perspective on the use of artificial intelligence (AI) in central bank policy work. Robinson highlighted the growing interest in AI technologies to enhance economic forecasting and modeling, especially in light of recent challenges faced by central banks in predicting post-pandemic inflation trends.
Robinson acknowledged the positive impact of AI in areas such as identifying financial anomalies, analyzing large volumes of text data, and generating inflation forecasts using social media data. He praised AI for its flexibility in capturing nonlinear economic dynamics and the ability of large language models (LLMs) to simulate economic scenarios and forecast inflation accurately.
Despite the promising applications of AI, Robinson also highlighted some limitations, particularly in explaining the rationale behind AI predictions. He noted that LLMs struggle with logical reasoning and mathematical operations, indicating that they are not yet capable of providing credible explanations for their forecasts.
To address these limitations, Robinson suggested integrating AI techniques into existing economic models as satellite models to complement core structural models. He emphasized the importance of combining AI with economic theory to enhance policymakers’ efficiency and decision-making processes.
Overall, Robinson views AI as a valuable tool for central banks, offering new ways to address complex economic challenges and improve forecasting accuracy. As central banks continue to explore the integration of AI into their modeling frameworks, Robinson anticipates exciting opportunities for leveraging AI technologies to enhance economic policy development and decision-making.
