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Real Interest Rate and Labor Market Performance around the World

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  • Horst Feldmann

Abstract

This article studies the effects of the real interest rate on labor market performance. Using a much larger sample of countries and more indicators of labor market performance than have been used in previous articles, it finds that a rise in the real interest rate increases the unemployment rate, raises the share of long‐term unemployed, and reduces the employment rate. The magnitude of these effects is very small in the short run but much more pronounced—though still fairly small—in the long run. Young people are disproportionately affected. The results are robust to variations in specification.

Suggested Citation

  • Horst Feldmann, 2013. "Real Interest Rate and Labor Market Performance around the World," Southern Economic Journal, John Wiley & Sons, vol. 79(3), pages 659-679, January.
    • Handle: RePEc:wly:soecon:v:79:y:2013:i:3:p:659-679
    DOI: 10.4284/0038-4038-2011.156
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