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House Prices in the Measurement of Inflation - An Application Using Irish Data

Author

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  • Róisín O’Sullivan

    (Smith College, Massachusetts)

Abstract

This paper illustrates the impact on Irish inflation of including a house-price series with the current components of the harmonised index of consumer prices (HICP). We construct a dynamic factor index of inflation that weights the individual price series according to the strength of their signal about the common trend in prices. As the relatively noisy house-price series attracts a weight of only 3 per cent in the index, the inclusion of house prices in this way does not hugely alter the recent pattern of inflation for Ireland, despite house prices exhibiting much stronger growth on average than the current measure of consumer prices.

Suggested Citation

  • Róisín O’Sullivan, 2005. "House Prices in the Measurement of Inflation - An Application Using Irish Data," The Economic and Social Review, Economic and Social Studies, vol. 36(2), pages 157-178.
    • Handle: RePEc:eso:journl:v:36:y:2005:i:2:p:157-178
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    References listed on IDEAS

    as
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    6. Michael F. Bryan & Stephen G. Cecchetti, 1993. "The consumer price index as a measure of inflation," Economic Review, Federal Reserve Bank of Cleveland, vol. 29(Q IV), pages 15-24.
    7. Robert A. Pollak, 1975. "The Intertemporal Cost of Living Index," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 4, number 1, pages 179-198, National Bureau of Economic Research, Inc.
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