Should Monetary Policy Pay Attention to House Prices? The Czech National Bank's Approach

Monetary and macroprudential policies are interconnected parts of the twin mandate of many central banks. We describe the Czech National Bank's approach to one aspect of integrating these two policies, namely the use of a broader inflation measure that includes house prices and enters monetary policy considerations along with headline consumer price index (CPI) inflation. We further argue that, in terms of theory, the broader inflation gauge is at least as suitable as headline CPI for measuring the value of money, but we also acknowledge the practical problems that arise from the use of the broader index.Full Publication: 'http://ssrn.com/abstract=3101163' Macroprudential Frameworks, Implementation and Relationship with Other Policies