The Lucas Critique in Practice: An Empirical Investigation of the Impact of European Monetary Integration on the Term Structure

Peter A.G. VanBergeijk and Jan Marc Berk
Authors registered in the RePEc Author Service: Peter A.G. van Bergeijk

No 82, IEW - Working Papers from Institute for Empirical Research in Economics - 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.

Keywords: Lucas Critique; Monetary Union; Term Structure (search for similar items in EconPapers)
JEL-codes: E43 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-eec and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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