Price stability as monetary objective: the importance of a perfect price index number

This article discusses and advocates extension of the traditional price index to include asset prices. A price index which reflects current asset prices would be of great help to those preparing monetary policy for EMU, and is particularly relevant in the current situation of low inflation as shown up by the traditional price indices. These indices are furthermore presumably subject to upward biasses, so that it has become difficult to pinpoint actual inflation, and hence to formulate monetary policy for EMU. Moreover, it has consequences for the money concept used.