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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title The Lucas Critique in Practice: An Empirical Investigation of the Impact of European Monetary ...
Organization Unit
Authors
  • Peter A G VanBergeijk
  • Jan Marc Berk
Language
  • English
Institution University of Zurich
Series Name Working paper series / Institute for Empirical Research in Economics
Number No. 82
ISSN 1424-0459
Date 2001
Abstract Text 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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