The Korean Economic Forum
Discussion on the CPI and Owner-occupied Housing Costs
Hyoung-Seok Oh (Bank of Korea) and Daeseong Han (Bank of Korea and KDI School)Year 2022Vol. 15No. 2
AbstractRecently, there has been a growing number of opinions that the owneroccupied housing cost(OOH costs) should be reflected in the Consumer Price Index(CPI), which is used as an indicator for the Bank of Korea’s inflation target. This is because the CPI, which does not reflect the OOH costs, has a significant limit in expressing the entire price pressure of the economy. This paper investigates the current status and characteristics of the case of OOH costs in 10 advanced countries, including the United States, Canada, and New Zealand, in order to refer to the main discussion to reflect the OOH costs in Korea’s CPI in the future. In addition, the ECB’s recent decision to reflect the OOH costs in the target measure of inflation is also investigated. It is judged that there is a high need to reflect the OOH costs in the inflation target measure of the Bank of Korea for it’s efficient monetary policy operation. Considering this, it is highly necessary in Korea to reflect the OOH costs in the CPI, which is being used as a target index for price stability by the Bank of Korea, and for this purpose, it is judged that extensive discussion and in-depth review should be initiated. However, as there is currently no international standard method for calculating the OOH costs, and CPI volatility may increase. Therefore, it is necessary to derive the most suitable method for calculating the OOH costs for our economic conditions through in-depth consultations and reviews between the National Statistical Office and the Bank of Korea, and the gathering of opinions from experts.