Real interest rate and labor market performance in developing countries

Using data on 68 developing countries from 1979 to 2008 and controlling for a wide array of factors, this paper finds that a rise in the real interest rate increases the unemployment rate and decreases the employment rate. The magnitude of these effects is small. The results are robust to variations in specification.

► We use data on 68 developing countries and a large number of controls. ► A rise in the real interest rate increases the unemployment rate and decreases the employment rate. ► The magnitude of the effects is small.