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Owner-Occupied Housing Costs and Bias in the Irish Consumer Price Index

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Author Info
Colm McCarthy (University College of 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.

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File URL: http://www.ucd.ie/economics/research/papers/2007/WP07.07.pdf
File Format: application/pdf
File Function: First version, 2007
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Publisher Info
Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200707.

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Length: 19 pages
Date of creation: 20 Jun 2007
Date of revision:
Handle: RePEc:ucn:wpaper:200707

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Related research
Keywords: Consumer Price Index; Cost of Living Index; Payments Approach; Owner-Occupied Housing;

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Find related papers by JEL classification:
C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Philip R. Lane & Patrick Honohan, 2003. "Divergent Inflation Rates in EMU," Trinity Economics Papers 20034, Trinity College Dublin, Department of Economics. [Downloadable!]
    Other versions:
  2. Goodhart, Charles, 2001. "What Weight Should Be Given to Asset Prices in the Measurement of Inflation?," Economic Journal, Royal Economic Society, vol. 111(472), pages F335-56, June. [Downloadable!] (restricted)
  3. Raquel Arévalo & Javier Ruiz-Castillo, 2004. "The Rental Equivalence Approach To Nonrental Housing In The Consumer Price Index. Evidence From Spain," Economics Working Papers we041704, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  4. C. Goodhart, 2001. "What Weight Should be Given to Asset Prices in the Measurementof Inflation?," DNB Staff Reports (discontinued) 65, Netherlands Central Bank. [Downloadable!]
  5. Ian Crawford & Isabella Image, 2004. "The Retail Price Index and the Cost-of-Living Index: testing for consistency in theory and practice," Fiscal Studies, Institute for Fiscal Studies, vol. 25(1), pages 79-91, March.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mark A. Wynne, 2008. "How should central banks define price stability?," Globalization and Monetary Policy Institute Working Paper 08, Federal Reserve Bank of Dallas. [Downloadable!]
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