Do not underestimate the RTW campaign engine, especially with BI.
AI does know when it's beaten and will negotiate peace with you just like in paradox games, but unfortunately the "I'm beaten" parameter is coded in a relavitely narrow window.

This is unfortunately not seen in most mods as modders always give extra money to AI one way or the other, plus the "snowball effect" plus the huge trade multiplier effect which makes income grow much more than in a linear way.
This basically causes AI to think "I'm rich, I still have a chance" while we know better.

Once you "deflate" the economy AI becomes more passive (which in player's eyes is a bad thing) but less money also means that the player will be slower as well.
On the bright side, it allows you to see things like a faction you're bordering and you've been at war with for 20 years asking your for peace if it comes under pressure on another front.

This may or may not also be affected by the presence of another hated institution in game: the senate.
While I'm still researching that front, descr_senate.txt is the only txt file in game that shows an editable AI threshold, although the lack of research and testing does not give a 100% correct estimate of its effect globally.

That said, EB's huge amount of historical reseach and gameplay mechanisms bring a very solid layer of sophistication in game that more than compensates for AI flaws and gives the experience we all love.