Skip to main content

Inflation Dynamics in the Age of Robots: Evidence and Some Theory

June 21, 2019
Takuji Fueki*1
Kohei Maehashi*2


Over the past decade, one of the central questions in macroeconomics has been the missing link observed between inflation and fluctuations in economic activity. We approach this issue with a particular focus on advances in robots, or what are essentially autonomous machines. The contributions of the paper are twofold. First, using a country level balanced panel dataset, we provide significant evidence to show that advances in robots are one factor behind the missing link. Second, we ask a standard New-Keynesian model to rationalize this fact. The distinguishing feature is the introduction of capital which is substituted for human labor, and can therefore be interpreted as the use of robots. Due to this feature and developments in robot, firms can adjust their production by using robots, whose efficiency is getting higher, instead of employing human labor. Hence, the responsiveness of marginal costs to changes in economic activity becomes weakened, and thus, our model supports the empirical fact that advances in robots are one factor behind the missing link.

JEL Classification
E12, E22, E31

Robot, Labor-substitute capital, Phillips curve, Missing inflation.

  1. *1Research and Statistics Department, Bank of Japan
    E-mail :
  2. *2Research and Statistics Department, Bank of Japan (currently at the Financial System and Bank Examination Department)
    E-mail :


Papers in the Bank of Japan Working Paper Series are circulated in order to stimulate discussion and comments. Views expressed are those of authors and do not necessarily reflect those of the Bank.
If you have any comment or question on the working paper series, please contact each author. When making a copy or reproduction of the content for commercial purposes, please contact the Public Relations Department ( at the Bank in advance to request permission. When making a copy or reproduction, the source, Bank of Japan Working Paper Series, should explicitly be credited.