House prices and inflation : a cointegration analysis for Finland and Sweden

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dc.contributor Suomen Pankki Barot, Bharat Takala, Kari 2014-09-22T07:58:15Z 2014-09-22T07:58:15Z 1998
dc.identifier.issn 0785-3572
dc.description.abstract Given the emphasis on price stability in monetary policy, the concern caused by recent rapid increases in housing prices are understandable.It is suspected that such rises may provide early indication of mounting inflationary pressure.The purpose of this paper is to formulate and estimate an error-correction system model for housing prices and inflation for forecasting purposes.By using the estimated cointegrating vector, we also get an estimate of the equilibrium level for house prices that might be helpful in analysing the current situation in the housing market and the stance for monetary policy. Housing prices typically exhibit large cycles, and they are thus predictable to some extent.Volatility is caused by the fact that the supply of houses does not react perfectly to changes in housing demand.However, housing prices and inflation tend to have similar growth rates over the long run.In other words, houses provide a good inflation shelter, but in the long run, the real return to is equal to the explicit or implicit rental income derived from the owning of houses.The estimation results also show that the changes in the general price level are transmitted into house prices rather quickly, but inflation is surprisingly insensitive to housing prices.The equilibrium relationship between housing prices and consumer prices is also affected in the short run by variables such as interest rates, wages and the unemployment rate. Keywords: House prices, inflation, cointegration
dc.format.extent 40 s.
dc.language.iso eng
dc.relation.ispartofseries Bank of Finland Research Discussion Papers
dc.subject asunnot
dc.subject hinnat
dc.subject inflaatio
dc.subject Ruotsi
dc.subject Suomi
dc.subject SP
dc.title House prices and inflation : a cointegration analysis for Finland and Sweden
dc.type Sarjajulkaisu
dc.identifier.urn URN:NBN:fi:bof-20140807345 Suomen Pankin keskustelualoitteita
dc.series.year 1998
dc.series.number 12/1998
dc.series.sortingnumber 12 18.6.1998
dc.contributor.orgunit Suomen Pankin Kansantalouden osasto

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