Consumer price index, real estate price weight and monetary policy in the Czech Republic
by František Táborský
International Journal of Economic Policy in Emerging Economies (IJEPEE), Vol. 19, No. 2, 2024

Abstract: This paper discusses the current CPI methodology and its approach to real estate prices in the Czech Republic. The author presents an alternative calculation with a higher weight of real estate prices, which significantly changes the course of inflation in the period from 2010 to 2019. However, setting a new weight has a number of problems and no clear solution. Different calculation of inflation would also have a significant impact on the monetary policy stance and the level of the key interest rate. The beginning of the period under review indicates a lower level of interest rates and the introduction of negative rates or another form of monetary conditions easing. On the other hand, the subsequent rise in real estate prices would also lead to higher interest rates, which in the extreme scenario would be up to 75 bps higher in 2017 compared to the baseline scenario.

Online publication date: Tue, 07-May-2024

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