House Price Expectations and Inflation Expectations: Evidence from Survey Data

Vedanta Dhamija, Ricardo Nunes and Roshni Tara

No 1069, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: Housing is a closely monitored and prominent sector for households. We find that households tend to overweight house price expectations when forming inflation expectations with a coefficient of 25–45 percent, significantly above the weight of house prices in the inflation index. We first use two datasets, a multitude of controls, and an instrumental variable approach to address endogeneity. We then use a second strategy based on household heterogeneity. As expected, we find a significant effect of cognitive abilities and whether households moved house recently. We model this household behavior in a two-sector New Keynesian model with an overweighted and a non-overweighted sector and show that overweighted sectors are disproportionately more important for monetary policy.

Date: 2025-01-30
New Economics Papers: this item is included in nep-cba, nep-cna, nep-dge, nep-mac and nep-mon
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Related works:
Working Paper: House Price Expectations and Inflation Expectations: Evidence from Survey Data (2023)
Working Paper: House Price Expectations and Inflation Expectations: Evidence from Survey Data (2023)
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