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The housing price boom of the late 1990s: Did inflation targeting matter?

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  • Frappa, Sébastien
  • Mésonnier, Jean-Stéphane

Abstract

The recent boom in the housing markets of most developed economies has spurred criticism that inflation targeting central banks may have neglected the build-up of financial imbalances. This paper provides a formal empirical test of such claims, using a standard program evaluation methodology to control for a possible bias due to self-selection into inflation targeting. We consider 17 industrial economies over the period 1980-2007, among which nine countries have targeted inflation at some point. We find robust evidence of a significant positive effect of inflation targeting on real house price growth and on the house price-to-rent ratio.

Suggested Citation

  • Frappa, Sébastien & Mésonnier, Jean-Stéphane, 2010. "The housing price boom of the late 1990s: Did inflation targeting matter?," Journal of Financial Stability, Elsevier, vol. 6(4), pages 243-254, December.
    • Handle: RePEc:eee:finsta:v:6:y:2010:i:4:p:243-254
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