Search-and-Matching Analysis of High Unemployment Caused by the Zero Lower Bound

Robert Hall ()

Review of Economic Dynamics, 2016, vol. 19, 210-217

Abstract: A basic principle of macroeconomics holds that an excessive real interest rate is the cause of high unemployment at the zero lower bound on the nominal interest rate. Absent the bound, the rate could be negative and the real rate could be low enough to restore full employment. Models backing up this principle make controversial assumptions about price-stickiness and the failure of market-clearing in the product market and sometimes in the labor market. This paper generates realistic effects of the zero lower bound without those assumptions, by substituting a search-and-matching setup in both the product and labor markets. (Copyright: Elsevier)

Keywords: Unemployment; DMP model; Zero lower bound (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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Working Paper: Comments on Hall's "Clashing Theories of Unemployment" (2011)
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DOI: 10.1016/j.red.2015.12.003

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