Monday, September 19, 2011

How the CPI hid the housing bubble

Recent discussions about the CPI have brushed over a key change that occurred in the construction of the index in 1998. In its 13th Series the CPI became a pure price index utilising an acquisitions approach, rather than a cost-of-living index utilising an outlays approach.  One feature of this change is that it removed land costs for owner-occupiers – something which doesn’t appear to reflect reality and provides some intriguing results.
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Read the full article at MacroBusiness

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