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New Estimates for the Price of Housing in the Japanese CPI

Author

Listed:
  • Diewert, W. Erwin
  • Imai, Satoshi
  • Shimizu, Chihiro

Abstract

The paper looks at problems associated with measuring the services of owner-occupied housing (OOH) in the Japanese CPI. The paper shows that alternative approaches to measuring the services of OOH lead to quite different measures of CPI inflation for Japan. The Japanese CPI uses a rental equivalence approach to measuring OOH services and uses an index of all paid rents to price these services. However, Japanese rents are very sticky and under these circumstances, it seems more appropriate to use an index of newly contracted rents to value the opportunity cost of using the services of owned dwelling units. The paper examines this issue. It also looks at the adequacy of the sampling approach used in the Japanese CPI and at the problems surrounding the treatment of depreciation in constructing constant quality indexes for paid rents in the Japanese CPI. Finally, hedonic regressions for the quality adjustment of rents are run on an extensive data set.

Suggested Citation

  • Diewert, W. Erwin & Imai, Satoshi & Shimizu, Chihiro, 2015. "New Estimates for the Price of Housing in the Japanese CPI," Economics working papers erwin_diewert-2015-14, Vancouver School of Economics, revised 17 Jul 2015.
  • Handle: RePEc:ubc:bricol:erwin_diewert-2015-14
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    File URL: http://econ.sites.olt.ubc.ca/files/2015/07/pdf_paper_erwin-diewert-15-02New-estimatesfor-the-price.pdf
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    References listed on IDEAS

    as
    1. Caballero, Ricardo J. & Engel, Eduardo M. R. A., 1993. "Microeconomic rigidities and aggregate price dynamics," European Economic Review, Elsevier, vol. 37(4), pages 697-711, May.
    2. Erwin Diewert & Chihiro Shimizu, 2017. "Alternative Approaches to Commercial Property Price Indexes for Tokyo," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(3), pages 492-519, September.
    3. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 215-268, November.
    4. W. Erwin Diewert & Kevin J. Fox & Chihiro Shimizu, 2016. "Commercial Property Price Indexes And The System Of National Accounts," Journal of Economic Surveys, Wiley Blackwell, vol. 30(5), pages 913-943, December.
    5. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    6. Caballero, Ricardo J. & Engel, Eduardo M.R.A., 2007. "Price stickiness in Ss models: New interpretations of old results," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 100-121, September.
    7. Diewert, Erwin & Shimizu, Chihiro, 2015. "Residential Property Price Indices For Tokyo," Macroeconomic Dynamics, Cambridge University Press, vol. 19(8), pages 1659-1714, December.
    8. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    9. Diewert, Erwin, 2007. "The Paris OECD-IMF Workshop on Real Estate Price Indexes: Conclusions and Future Directions," Economics working papers diewert-07-01-03-08-12-12, Vancouver School of Economics, revised 31 Jan 2007.
    10. Robert J. Gordon & Todd vanGoethem, 2005. "A Century of Housing Shelter Prices: Is There a Downward Bias in the CPI?," NBER Working Papers 11776, National Bureau of Economic Research, Inc.
    11. 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.
    12. C. Goodhart, 2001. "What Weight Should be Given to Asset Prices in the Measurementof Inflation?," DNB Staff Reports (discontinued) 65, Netherlands Central Bank.
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    More about this item

    Keywords

    housing rent; price rigidity; time-dependent model; state-dependent model; adjustment hazard function; user cost of housing; rental equivalence approa;

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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