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IR17-010_Shah+Sosvilla.pdf (1.59 MB)

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Working paper

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2017

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cc-by-nc-nd, (c) Shah et al., 2017
Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/112125

Seeking price and macroeconomic stabilisation in the euro area:The role of house prices and stock prices

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Abstract

We propose an Economic Stability Index (ESI) incorporating house prices and stock prices as components of the measure of the inflation rate in order to allow the European Central Bank (ECB) to achieve both price and macroeconomic stability. We use an optimisation approach to estimate target weights for different sectoral prices in the broader price index, which depend on sectoral parameters other than those used to compute the Harmonised Index of Consumer Prices applied by the ECB to gauge price stability in the euro area (EA). Our results suggest that if the ECB had targeted the ESI, it would have implemented a different monetary policy which would had increased stability in the EA’s economic activity and would have helped to create adequate preconditions for sustainable economic growth and job creation.

Subject

Accions (Borsa), Capital social (Economia), Inflació

Subject (English)

Stocks, Capital stock, Inflation

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Documents de treball (Institut de Recerca en Economia Aplicada Regional i Pública (IREA))

Citation

SHAH, Imran Hussain and SOSVILLA RIVERO, Simón. Seeking price and macroeconomic stabilisation in the euro area:The role of house prices and stock prices. IREA – Working Papers. 2017. Vol.  IR17/10. ISSN 2014-1254. [consulted: 8 of June of 2026]. Available at: https://hdl.handle.net/2445/112125

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