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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Paper provided by Institute for Empirical Research in Economics - IEW in its series IEW - Working Papers with number
iewwp082.
Find related papers by JEL classification: E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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Aleksander Berentsen & Guillaume Rocheteau, .
"Money and Information,"
IEW - Working Papers
iewwp099, Institute for Empirical Research in Economics - IEW.
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Aleksander Berentsen & Guillaume Rocheteau, 2004.
"Money and Information,"
Review of Economic Studies,
Blackwell Publishing, vol. 71(4), pages 915-944, October.
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Aleksander Berentsen & Guillaume Rocheteau, 2003.
"Money and the Gains from Trade,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 263-297, February.
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