Housing Rents and Inflation Rates

51 Pages Posted: 31 May 2016 Last revised: 29 Apr 2018

Brent W. Ambrose

Pennsylvania State University

N. Edward Coulson

Pennsylvania State University, College of the Liberal Arts - Department of Economic; National Bureau of Economic Research (NBER)

Jiro Yoshida

Pennsylvania State University - Smeal College of Business; The University of Tokyo - Graduate School of Economics

Date Written: April 20, 2018

Abstract

This paper demonstrates that inflation rates are significantly modified when they are based on the alternative quality-adjusted measure of housing rents that is based on a monthly statistic of landlord net rental income. The official rate was overestimated by 1.7% to 4.2% annually during the Great Recession but underestimated by 0.3% to 0.9% annually during the current expansionary period. We further demonstrate significant impacts of the modified inflation rates on Social Security and real gross domestic product. These impacts persist for a long term because the modified indexes are integrated of order one whereas the official indexes are trend stationary.

Keywords: measurement error, economic statistics, owners' equivalent rent, Consumer Price Index, Personal Consumption Expenditures, National Income and Product Accounts

JEL Classification: E01, E31, R31, H55

Suggested Citation

Ambrose, Brent W. and Coulson, N. Edward and Yoshida, Jiro, Housing Rents and Inflation Rates (April 20, 2018). Available at SSRN: https://ssrn.com/abstract=2787193 or http://dx.doi.org/10.2139/ssrn.2787193

Brent W. Ambrose

Pennsylvania State University ( email )

University Park, PA 16802-3306
United States
814-867-0066 (Phone)
814-865-6284 (Fax)

N. Edward Coulson

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Pennsylvania State University, College of the Liberal Arts - Department of Economic ( email )

524 Kern Graduate Building
University Park, PA 16802-3306
United States
814-863-0625 (Phone)
814-863-4775 (Fax)

Jiro Yoshida (Contact Author)

Pennsylvania State University - Smeal College of Business ( email )

368 Business Building
Smeal College of Business
University Park, PA 16802
United States
814-865-0392 (Phone)
814-865-6284 (Fax)

HOME PAGE: http://www.personal.psu.edu/juy18

The University of Tokyo - Graduate School of Economics ( email )

7-3-1 Hongo
Bunkyo-ku, Tokyo 113-0033
Japan
813-5841-5653 (Phone)
813-5841-5521 (Fax)

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