Should Monetary Policy Pay Attention to House Prices? The Czech National Bank's Approach
12 Pages Posted: 24 Jan 2018
Date Written: December 2017
Monetary and macroprudential policies are interconnected parts of the twin mandate of many central banks. We describe the Czech National Bank’s approach to one aspect of integrating these two policies, namely the use of a broader inflation measure that includes house prices and enters monetary policy considerations along with headline consumer price index (CPI) inflation. We further argue that, in terms of theory, the broader inflation gauge is at least as suitable as headline CPI for measuring the value of money, but we also acknowledge the practical problems that arise from the use of the broader index.
Keywords: macroprudential policy, monetary policy, financial stability, consumer price index, house prices, owner-occupied housing
JEL Classification: E31, E44, E50, R30
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