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Owner Occupied Housing in the CPI and Its Impact On Monetary Policy During Housing Booms and Busts

Author

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  • Robert J. Hill

    (University of Graz, Austria)

  • Miriam Steurer

    (University of Graz, Austria)

  • Sofie R. Waltl

    (Luxembourg Institute of Socio-Economic Research, Luxembourg)

Abstract

The treatment of owner-occupied housing (OOH) is probably the most important unresolved issue in infl ation measurement. The European Union has been grappling with this problem for over a decade. We argue for measuring OOH costs using a particular version of the user cost method. We then compare the impact of eight different treatments of OOH on the consumer price index (CPI), using quantile hedonic regression. The impact on the CPI is large, and the treatment of OOH emerges as an essential prerequisite to discussions over how an infl ation targeting central bank should respond to housing booms and busts.

Suggested Citation

  • Robert J. Hill & Miriam Steurer & Sofie R. Waltl, 2017. "Owner Occupied Housing in the CPI and Its Impact On Monetary Policy During Housing Booms and Busts," Graz Economics Papers 2017-12, University of Graz, Department of Economics.
    • Handle: RePEc:grz:wpaper:2017-12
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    Cited by:

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    2. Allen-Coughlan, Matthew & Coffey, Cathal & Martinez-Cillero, Maria & Kostarakos, Ilias & McQuinn, Kieran & O’Toole, Conor, 2020. "Estimating the cost of Irish housing for the CPI: A rental equivalence approach," Papers WP676, Economic and Social Research Institute (ESRI).
    3. Ahrens, Achim & Beirne, Keelan & Economides, Philip & Kostarakos, Ilias & McQuinn, Kieran & O'Toole, Conor, 2020. "A review of the methodologies used in compiling owner-occupiers’ housing indices," Papers WP651, Economic and Social Research Institute (ESRI).

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    More about this item

    Keywords

    Measurement of infl ation; Owner occupied housing; User cost; Quantile regression; Hedonic imputation; Housing booms and busts; Inflation Targeting;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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