Economics, Econometrics and Finance
4 years ago

Rising Housing Volatility Sparks Inflation Concerns in Advanced Economies

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RePEc: Research Papers in Economics
Falling Natural Rates, Rising Housing Volatility and the Optimal Inflation Target
Klaus Adam, Oliver Pfäuti, Timo Reinelt

Paper Summary

Natural interest rates have been falling, leading to more volatile housing prices. If housing price volatility is due to rational expectations, inflation only slightly increases. However, if speculation drives housing price volatility, inflation rises significantly with lower natural rates.

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