A new consumer price index that incorporates housing

Abstract

A long lasting controversy in Sweden as well as internationally is how to best estimate a price on the services of owner occupied housing in a consumer price index. There is no international consensus and different approaches have been adopted. In this article we use a true cost-of-living index previously suggested by one of the authors, apply the model to Swedish data and compare the results to the official Swedish consumer price index. We find that the official index has underestimated changes in the cost-of-living and suggest a region in which a better approximation should lie.