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The Lucas Critique in Practice: An Empirical Investigation of the Impact of European Monetary ...


VanBergeijk, Peter A G; Berk, Jan Marc (2001). The Lucas Critique in Practice: An Empirical Investigation of the Impact of European Monetary ... Working paper series / Institute for Empirical Research in Economics No. 82, University of Zurich.

Abstract

An empirical investigation of the term structure (the relation of the long interest rate to the short interest rate) showed structural change as the deadline for the euro became closer. Our empirical analysis of the term structures (yield curves) in 12 OECD countries uncovers that econometrically estimated behavioural equations for most EMU countries were stable even in the light of the creation of the euro. This finding would seem to defy the Lucas Critique. However, the significant structural instability found for the euro area's core country Germany suggests that the Lucas Critique is relevant in the analysis of the impact of the creation (and future extensions) of EMU.

Abstract

An empirical investigation of the term structure (the relation of the long interest rate to the short interest rate) showed structural change as the deadline for the euro became closer. Our empirical analysis of the term structures (yield curves) in 12 OECD countries uncovers that econometrically estimated behavioural equations for most EMU countries were stable even in the light of the creation of the euro. This finding would seem to defy the Lucas Critique. However, the significant structural instability found for the euro area's core country Germany suggests that the Lucas Critique is relevant in the analysis of the impact of the creation (and future extensions) of EMU.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
Dewey Decimal Classification:330 Economics
Language:English
Date:July 2001
Deposited On:29 Nov 2011 21:26
Last Modified:05 Apr 2017 23:11
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

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