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Pre-Lecture Assignment

This assignment delves into the "Lucas critique," a fundamental concept in economic theory that argues against the reliability of historical data for policy formulation. You will explore its implications through the lens of Frankel and Rose's 1997 paper, “Is EMU more justifiable ex post than ex ante?” This reading provides insights into the endogeneity argument they present and demonstrates how it embodies the principles of the Lucas critique. Prepare to analyze these concepts critically and prepare for a deeper understanding of economic modeling.

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Pre-Lecture Assignment

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  1. Pre-Lecture Assignment • What is the so called “Lucas critique”? (Search the Internet for an explanation) • Read Jeffrey A. Frankel and Andrew K. Rose (1997), “Is EMU more justifiable ex post than ex ante?” European Economic Review, 41, 753-760. (available through the webpages of the Aalto library (Nelli)) What is the endogeneity argument of Frankel and Rose? How is it an application of the Lucas critique?

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