Robert J. Hill
University of Graz
Miriam Steurer
University of Graz
Giang Nghiem
University of Hanover
Sofie R. Waltl
University of Cambridge
ⓡ Random Order Applied
Abstract
The European Union has been debating for over 20 years how to bring owner-occupied housing (OOH) into the Harmonized Index of Consumer Prices (HICP ) – the flagship measure of inflation used by the European Central Bank (ECB) to set monetary policy. We provide a solution to this problem based on a smoothed version of the user-cost method that has desirable properties and does not destabilize the HICP . We then show how our extended HICP would have helped the ECB better anticipate shocks such as the 2022 inflation by causing measured inflation to rise above the 2% target sooner. Also, our measure aligns better with the inflation experienced by households.
JEL.: C31; C43; E01; E31; E52; R31
Keywords: Inflation measurement; Owner-occupied housing; Harmonized Index of Consumer Prices (HICP); Housing booms and busts; Inflation targeting; Leaning against the wind
Dissemination
Presentations (incl. scheduled): [Cambridge Real Estate Research Club at University of Cambridge] [3rd Workshop on Residential Housing Markets – A Market in Distress and Potential Solutions at WU Vienna] [14th European Meeting of the Urban Economics Association at Humboldt University Berlin] [First Oxford Real Estate Research Conference at Saïd Business School, University of Oxford][CERF Cavalcade, at Judge Business School, University of Cambridge][AREUEA International Conference, Barcelona][Society of Economic Measurement (SEM), Athens][School of Public Administration & Policy, Renmin University of China][International Symposium on Land and Real Estate Policy Research, Nanjing Agricultural University]
Sofie R Waltl 