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Interest Rates and Unemployment: An Underwhelming Relation

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  • Fix, Blair

Abstract

For the last few months, I’ve been studying the distributional effects of interest-rate hikes. There’s been no shortage of surprising results. In this post, I’ll discuss an effect that is surprising because it’s underwhelming. Many economist claim that when interest rates rise, unemployment will increase. The idea is that higher rates make businesses tighten their belts, leading to less hiring and greater unemployment. Looking at the evidence, I find that this claim is not particularly compelling.

Suggested Citation

  • Fix, Blair, 2023. "Interest Rates and Unemployment: An Underwhelming Relation," EconStor Preprints 270868, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:270868
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    More about this item

    Keywords

    interest rate; unemployment;

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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