This dissertation examines the implications of sticky rents on the measurement of owner-occupied housing in the Consumer Price Index (CPI). I argue that marginal and not average rents are the most theoretically justified measurement of owners' equivalent rent (OER), and that the current measurement of rental inflation using average rents is methodologically incorrect. I then discuss the literature on sticky rents and tenure discounts and present a theoretical model showing the implications of sticky rents for aggregate measures of inflation. Then I use two new data sources to construct marginal rent measures to compare to average rent measures. The results show that marginal rents reflect market turning points sooner, and show a larger post- housing bubble decline in rents. In addition, marginal rents are shown to forecast overall inflation better than average rents. Finally, the implications of these results for policy are considered using the Taylor Rule for optimal monetary policy. The results present suggestive evidence that the impacts of switching to marginal rents may be large enough to significantly impact monetary policy and allow the Federal Reserve to be more responsive to both the boom and bust of housing bubbles. / Economics
| Identifer | oai:union.ndltd.org:TEMPLE/oai:scholarshare.temple.edu:20.500.12613/2061 |
| Date | January 2013 |
| Creators | Ozimek, Adam |
| Contributors | Ritter, Moritz B., Dunkelberg, William C., Huffman, Forrest, Voith, Richard |
| Publisher | Temple University. Libraries |
| Source Sets | Temple University |
| Language | English |
| Detected Language | English |
| Type | Thesis/Dissertation, Text |
| Format | 106 pages |
| Rights | IN COPYRIGHT- This Rights Statement can be used for an Item that is in copyright. Using this statement implies that the organization making this Item available has determined that the Item is in copyright and either is the rights-holder, has obtained permission from the rights-holder(s) to make their Work(s) available, or makes the Item available under an exception or limitation to copyright (including Fair Use) that entitles it to make the Item available., http://rightsstatements.org/vocab/InC/1.0/ |
| Relation | http://dx.doi.org/10.34944/dspace/2043, Theses and Dissertations |
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