Inflation Protection from Homeownership: Long-Run Evidence: 1814-2004
30 Pages Posted: 7 May 2007
Date Written: May 2007
This paper examines the inflation hedging capacity of the private home. We employ a unique set of long-term data for house prices, rents, and inflation for Amsterdam dating back to 1814. We analyze inflation protection using various methodologies, time periods, and investment horizons. Our results show that homeownership offers protection against expected inflation for investment horizons of ten years and longer; this is especially the case in periods when inflation is persistent. The hedging capacity of housing to unexpected inflation is weak. Hedge ratios increase with extending investment horizons.
Keywords: Inflation hedging, House Prices, Investment Horizons
JEL Classification: E31, E44, G12
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