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Should Inflation Measures Used by Central Banks Incorporate House Prices? The Czech Approach

Author

Listed:
  • Mojmir Hampl

    (Czech National Bank)

  • Tomas Havranek

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic
    Czech National Bank)

Abstract

In this paper we describe the Czech National Bank’s approach to incorporating macroprudential considerations into monetary policy decision making: the use of a broader inflation measure that gives substantial weight to house prices and is considered along with headline CPI inflation. We argue that, in terms of theory, the broader inflation gauge is at least as suitable for measuring the value of money as headline CPI inflation is, but we also acknowledge practical problems that arise from the use of the broader index.

Suggested Citation

  • Mojmir Hampl & Tomas Havranek, 2017. "Should Inflation Measures Used by Central Banks Incorporate House Prices? The Czech Approach," Working Papers IES 2017/12, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jul 2017.
    • Handle: RePEc:fau:wpaper:wp2017_12
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    File URL: http://ies.fsv.cuni.cz/sci/publication/show/id/5663/lang/cs
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    References listed on IDEAS

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    Cited by:

    1. Hodula Martin & Pfeifer Lukáš, 2018. "Fiscal-Monetary-Financial Stability Interactions in a Data-Rich Environment," Review of Economic Perspectives, Sciendo, vol. 18(3), pages 195-224, September.
    2. Jan Bruha & Michal Hlavacek & Lubos Komarek, 2017. "House Prices and Household Consumption: The Case of the Czech Republic," Working Papers 2017/11, Czech National Bank.

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    More about this item

    Keywords

    Consumer price index; financial stability; house prices; macroprudential policy; monetary policy; owner-occupied housing;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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