Owner-occupied housing costs and bias in the Irish Consumer Price Index

Colm McCarthy

No 200707, Working Papers from School of Economics, University College Dublin

Abstract: The treatment of owner-occupied housing costs is a recurring problem in the construction of consumer price indices, and there are competing methodologies. In the most widely-used Irish index, the Payments Approach, which attaches a weight to a term involving historical house prices and an interest rate, is used to measure these costs. It is argued that this has resulted in a substantial over-statement of inflation in recent quarters, and that the over-statement will continue for some time. The Irish version of Eurostat’s Harmonised Index of Consumer Prices, recently running well below the CPI, is a more reliable guide. Few national statistical offices use the Payments Approach, and it is argued that the procedure used in Ireland should be reviewed.

Keywords: Consumer Price Index; Cost of Living Index; Payments approach; Owner occupied housing; Cost and standard of living; Consumer price indexes; Price indexes (search for similar items in EconPapers)
JEL-codes: C43 C82 D12 E31 (search for similar items in EconPapers)
Date: 2007-06
New Economics Papers: this item is included in nep-cba, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:200707

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