Owner Occupied Housing, Inflation and Monetary Policy

Robert J. Hill
University of Graz, Austria

Miriam Steurer
University of Graz, Austria

Sofie R. Waltl
Luxembourg Institute of Socio-Economic Research, Luxembourg & Vienna University of Economics and Business, Austria


The ECB and Eurostat have been trying to bring owner-occupied housing (OOH) into the Harmonized Index of Consumer Prices (HICP) for two decades without success. OOH is now back on the agenda as part of the ECB’s new monetary-policy strategy. A fresh perspective is needed. We argue that a viable way forward is using a simplified version of the user-cost method. This would improve the harmonization of the HICP, help close the credibility gap between measured inflation and the public’s perception of it, and make it easier for the ECB to achieve its inflation target.

JEL.: C31; C43; E01; E31; E52; R31

Keywords: Measurement of inflation; Owner occupied housing; User cost; Rental equivalence; Quantile regression; Hedonic imputation; Housing booms and busts; Inflation targeting; Leaning against the wind; Phillips curve; Disinflation puzzle; Secular stagnation


Working Paper:  [Graz Economic Papers]

Presentations:  [NBER Conference on International Comparisons of Income, Prices and Production, MIT, Cambridge (MA), May 2016] [OeNB, Vienna, June 2016] [Oxford U, February 2017] [Institute of Fiscal Studies, London, May 2017] [GGDC 25th Anniversary Conference, Groningen, June 2017] [SEM conference at MIT, Cambridge (MA), July 2017][Reserve Bank of Australia, April 2018] [STATEC, Luxembourg, April 2018] [Economics Statistics Centre of Excellence (ESCoE) Conference on Economic Measurement, Bank of England, May 2018] [International Conference on Real Estate Statistics, Eurostat, Luxembourg, February 2019][US National Academy of Sciences, December 2020]

Media Coverage: Die Presse (AT), Central Banking (UK)D’Lëtzeburger Land (LU)Lëtzebuerger Journal (LU)