American Economic Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
Disentangling Rent Index Differences: Data, Methods, and Scope
American Economic Review: Insights
vol. 6,
no. 2, June 2024
(pp. 230–45)
Abstract
Rent measurement determines 32 percent of the CPI. Accurate rent measurement is therefore essential for accurate inflation measurement, but the CPI rent index often differs from alternative rent inflation measures. Using repeat-rent inflation measures created from CPI microdata, we show that this discrepancy is largely explained by differences in rent growth for new tenants relative to all tenants. New-tenant rent inflation provides information about future all-tenant rent inflation, but the use of new-tenant rents is contraindicated in a cost-of-living index such as the CPI. Nevertheless, policy-makers should integrate new-tenant inflation into inflation forecasts and monetary policy decisions.Citation
Adams, Brian, Lara Loewenstein, Hugh Montag, and Randal Verbrugge. 2024. "Disentangling Rent Index Differences: Data, Methods, and Scope." American Economic Review: Insights, 6 (2): 230–45. DOI: 10.1257/aeri.20220685Additional Materials
JEL Classification
- E31 Price Level; Inflation; Deflation
- E37 Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
- E52 Monetary Policy
- R31 Housing Supply and Markets