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Using house prices to compute the price of housing in the CPI

Author

Listed:
  • Beatty, Timothy K.M.
  • Larsen, Erling Røed
  • Sommervoll, Dag Einar

Abstract

Rental-equivalence is often used in computing price changes of owner-occupied housing in the CPI. We use an alternative approach, employing interest-adjusted house prices. For Norway 2000-2008 our method yielded a 30% CPI-increase, compared to the official 17%.

Suggested Citation

  • Beatty, Timothy K.M. & Larsen, Erling Røed & Sommervoll, Dag Einar, 2010. "Using house prices to compute the price of housing in the CPI," Economics Letters, Elsevier, vol. 106(3), pages 238-240, March.
  • Handle: RePEc:eee:ecolet:v:106:y:2010:i:3:p:238-240
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    References listed on IDEAS

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    1. N. Gregory Mankiw & Ricardo Reis, 2003. "What Measure of Inflation Should a Central Bank Target?," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1058-1086, September.
    2. Raquel Arévalo & Javier Ruiz-Castillo, 2006. "On the Imputation of Rental Prices to Owner-occupied Housing," Journal of the European Economic Association, MIT Press, vol. 4(4), pages 830-861, June.
    3. Huang, Kevin X.D. & Liu, Zheng, 2005. "Inflation targeting: What inflation rate to target?," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1435-1462, November.
    4. Timothy K.M. Beatty & Erling Røed Larsen & Dag Einar Sommervoll, 2005. "Measuring the Price of Housing Consumption for Owners in the CPI," Discussion Papers 427, Statistics Norway, Research Department.
    5. Erling Røed Larsen, 2007. "Does the CPI Mirror the Cost of Living? Engel's Law Suggests Not in Norway," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(1), pages 177-195, March.
    6. 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 335-356, June.
    7. Timothy Beatty & Erling Røed Larsen, 2005. "Using Engel curves to estimate bias in the Canadian CPI as a cost of living index," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 482-499, May.
    8. C. Goodhart, 2001. "What Weight Should be Given to Asset Prices in the Measurementof Inflation?," DNB Staff Reports (discontinued) 65, Netherlands Central Bank.
    9. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, April.
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