Macroeconomic Stabilization and Asset Prices in an AI Robo Economy with Universal Basic Income

This paper develops a fully microfounded New Keynesian DSGE model of an AI-driven “Robo Economy” in which human labor is entirely replaced by AI capital and robots, and aggregate demand is sustained through a universal basic income (UBI). The framework introduces a novel post-work demand-side scarcity—modeled via either smooth near-satiation in consumption services or a consumption–time constraint—to capture limits on humans’ ability to convert nominal income into goods demand. As a result, large UBI expansions can coexist with stable CPI inflation under standard inflation-targeting monetary policy, while simultaneously generating pronounced asset-price inflation in housing and equity markets. The model is used to compare CPI-only versus CPI-plus-asset-inflation Taylor rules and to analyze alternative UBI financing regimes, including money finance (MMT-style), tax finance, debt finance, and QE-dominant public holdings. Extensions to a small open economy show how exchange rates and imported inflation impose additional constraints. Overall, the paper provides a disciplined DSGE interpretation of monetary–fiscal interactions, inflation constraints, and asset-price dynamics in a fully automated economy.