The Impact of Artificial Intelligence on Financial Decision-making and Economic Policies

Abstract

Financial institutions together with economic governance have rapidly implemented artificial intelligence (AI) while facing the benefit of exceptional performance alongside substantial business risks. This research investigates what changes occur in financial decisions and policy development because of artificial intelligence models including LSTM RL and GAN and econometrics alongside ethical auditing. The outcome of AI highlights its transformative abilities because forecasted models enhance prediction of stock accuracy by 22% and reinforcement learning produces a 15% improvement as per validated results. AI relies on previous data normally, but its errors increase by 34% during emergencies while inherent biases perpetuate inequalities which leads to loan denials for vulnerable groups at an 18% rate although explainability tools are applied. The research demonstrates contradictory evidence since AI improves financial precision while creating social inequality because algorithms use standardized procedures while remaining unexplainable. The research proposes combining human involvement with AI-based structures through three frameworks including ethical and emergency oversight systems automated oversight systems and universal norm enforcement frameworks that link ethical practice to AI innovations. This research presents a method to use AI for inclusive development through adaptable feedback systems along with crisis testing environments that function as policy testing labs. AI economic benefits for societal progress must ensure more than fee increases for existing disconnections which require policymakers and their partners to work together on this institutional structure.