Owner Occupied Housing in the CPI and its Impact on Monetary Policy during Housing Booms and Busts
Robert Hill (),
Miriam Steurer () and
Sofie Waltl ()
Additional contact information
Miriam Steurer: Department of Economics, University of Graz
Department of Economics Working Papers from Vienna University of Economics and Business, Department of Economics
The treatment of owner-occupied housing (OOH) is probably the most important unresolved issue in inflation measurement. How -- and whether -- it is included in the Consumer Price Index (CPI) affects inflation expectations, the measured level of real interest rates, and the behavior of governments, central banks and market participants. We show that none of the existing treatments of OOH are fit for purpose. Hence we propose a new simplified user cost method with better properties. Using a micro-level dataset, we then compare the empirical behavior of eight different treatments of OOH. Our preferred user cost approach pushes up the CPI during housing booms (by 2 percentage points or more). Our findings relate to the following important debates in macroeconomics: the behavior of the Phillips curve in the US during the global financial crisis, and the response of monetary policy to housing booms, secular stagnation, and globalization.
Keywords: Measurement of inflation; Owner occupied housing; User cost; Rental equivalence; Quantile regression; Hedonic imputation; Housing booms and busts; Inflation targeting; Leaning against the wind; Phillips curve; Disinflation puzzle; Secular stagnation (search for similar items in EconPapers)
JEL-codes: C31 C43 E01 E31 E52 R31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac, nep-mon and nep-ure
Note: PDF Document
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Working Paper: Owner Occupied Housing in the CPI and its Impact on Monetary Policy during Housing Booms and Busts (2019)
Working Paper: Owner Occupied Housing in the CPI and Its Impact On Monetary Policy During Housing Booms and Busts (2018)
Working Paper: Owner Occupied Housing in the CPI and Its Impact On Monetary Policy During Housing Booms and Busts (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wiw:wiwwuw:wuwp285
Access Statistics for this paper
More papers in Department of Economics Working Papers from Vienna University of Economics and Business, Department of Economics Welthandelsplatz 1, 1020 Vienna, Austria.
Bibliographic data for series maintained by Department of Economics ().