This paper – which takes into consideration overall experience with the Harmonised Index of Consumer Prices (HICP) as well as the improvements made to this measure of inflation since 2003 – finds that the HICP continues to fulfil the prerequisites for the index underlying the ECB’s definition of price stability. Nonetheless, there is scope for enhancing the HICP, especially by including owner-occupied housing (OOH) using the net acquisitions approach. Filling this long-standing gap is of utmost importance to increase the coverage and cross-country comparability of the HICP. In addition to integrating OOH into the HICP, further improvements would be welcome in harmonisation, especially regarding the treatment of product replacement and quality adjustment. Such measures may also help reduce the measurement bias that still exists in the HICP. Overall, a knowledge gap concerning the exact size of the measurement bias of the HICP remains, which calls for further research. More generally, the paper also finds that auxiliary inflation measures can play an important role in the ECB’s economic and monetary analyses. This applies not only to analytical series including OOH, but also to measures of underlying inflation or a cost of living index.
Nickel, Christiane and Fröhling, Annette and Willeke, Caroline and Zevi, Giordano and Osbat, Chiara and Ganoulis, Ioannis and Koester, Gerrit B. and Lis, Eliza and Peronaci, Romana and Álvarez, L. J. and Hahn, E. and Beka, J. and Henkel, L. and Conflitti, C. and Herzberg, J. and Costain, J. and Hoeberichts, M. and Eiglsperger, M. and Jonckheere, J. and Fröhling, A. and Kalantzis, Y. and Ganoulis, I. and Kapatais, D. and Gautier, E. and Knetsch, T. and Goldhammer, B. and Koester, G. and Kondelis, E. and Rumler, F. and Kouvavas, O. and Schwind, P. and Krasnopjorovs, O. and Sosič, N. and Lis, E. and Strasser, Georg H. and Lünnemann, P. and Trezzi, R. and Martins, F. and Overbeek, F. van and Messner, T. and Vilm, L. and Mociunaite, L. and Vlad, A. and Nickel, C. and Wauters, J. and O'Brien, D. and Weinand, S. and Osbat, C. and Westermann, T. and Peronaci, R. and Willeke, C. and Popova, D. and Wintr, L. and Porqueddu, M. and Zekaite, Z. and Roma, M. and Zevi, G., Inflation Measurement and its Assessment in the Ecb's Monetary Policy Strategy Review (September, 2021). ECB Occasional Paper No. 2021265, Available at SSRN: https://ssrn.com/abstract=3928286 or http://dx.doi.org/10.2139/ssrn.3928286
Comparative Political Economy: Monetary Policy eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS
59
PAPERS
8,202
This Journal is curated by:
Yusaku Horiuchi at Affiliation not provided to SSRN
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.