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

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  • Robert E. Hall

    (Stanford University)

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)

Suggested Citation

  • Robert E. Hall, 2016. "Search-and-Matching Analysis of High Unemployment Caused by the Zero Lower Bound," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 210-217, January.
    • Handle: RePEc:red:issued:14-322
    DOI: 10.1016/j.red.2015.12.003
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    References listed on IDEAS

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    Cited by:

    1. Hall, R.E., 2016. "Macroeconomics of Persistent Slumps," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2131-2181, Elsevier.
    2. Guido Menzio & Randall Wright, 2016. "Introduction to the Special Issue in Honor of Dale Mortensen," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 1-3, January.

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