House Prices in the Measurement of Inflation in the Euro Area

Contemporary Economic Policy, Vol. 26, Issue 2, pp. 276-298, April 2008

23 Pages Posted: 18 Apr 2008

See all articles by Roisin O'Sullivan

Roisin O'Sullivan

Smith College - Department of Economics

Abstract

An important element of the current monetary policy debate in Europe is the question of if and how house prices should be included in the harmonized index of consumer prices (HICP). This paper uses a signal extraction approach to inflation measurement to illustrate the impact of including house prices when the aggregate inflation measure is constructed by assigning weights to individual price series based on their signal-to-noise ratio. The inclusion of house prices in the HICP in this manner does not materially impact the appropriate stance of monetary policy.

JEL Classification: E31, E52, E58

Suggested Citation

O'Sullivan, Roisin, House Prices in the Measurement of Inflation in the Euro Area. Contemporary Economic Policy, Vol. 26, Issue 2, pp. 276-298, April 2008, Available at SSRN: https://ssrn.com/abstract=1120557 or http://dx.doi.org/10.1111/j.1465-7287.2007.00069.x

Roisin O'Sullivan (Contact Author)

Smith College - Department of Economics ( email )

Northampton, MA 01063
United States

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