The majority of empirical research concurs
Feldmann 13 – Department of Economics, University of Bath
Horst Feldmann, “Real Interest Rate and Labor Market Performance around the World,” Southern Economic Journal, Vol. 79, No. 3, January 2013, pp. 659-679, https://www.jstor.org/stable/23809689
7. Conclusion
The regression results indicate that a rise in the real interest rate worsens labor market performance all over the world. Not only does it increase the unemployment rate, it also increases 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. They corroborate various theoretical models. They are also in line with most previous empirical research.
As mentioned in section 5, the evidence provided in this article corresponds to conditional correlations in the data. It does not establish causality. Still, the fact that a higher real interest rate is consistently correlated with a deterioration in labor market performance after two years even after controlling for many factors, is intriguing and indicates that the effect is likely to be causal.