THE IMPACT OF MONETARY POLICY ON UNEMPLOYMENT RATES

Monetary policy plays a central role in shaping macroeconomic outcomes, particularly employment levels and labor market stability. Central banks use monetary tools such as interest rate adjustments, open market operations and reserve requirements to influence economic activity. This article examines the theoretical foundations and empirical evidence regarding the impact of monetary policy on unemployment rates. It explores both expansionary and contractionary monetary policies and analyzes their short-run and long-run effects on employment. The study also considers different economic schools of thought, including Keynesian, Monetarist, and New Classical perspectives, as well as real-world experiences from developed and developing economies. The findings suggest that while monetary policy can significantly affect unemployment in the short run, its long-term influence is constrained by structural factors within the labor market.