Template-type: ReDIF-Paper 1.0  
Author-Name: Imran Hussain Shaha
Author-Email: I.Shah@bath.ac.uk
Author-Workplace-Name:  Department of Economics, University of Bath, Bath, UK.
Author-Name: Simón Sosvilla-Rivero
Author-Email: sosvilla@ccee.ucm.es
Author-Workplace-Name: Instituto Complutense de Estudios Internacionales (ICEI). Universidad Complutense de Madrid.
Title: Seeking price and macroeconomic stabilisation in the euro area: The role of house prices and stock prices
Abstract: We propose an Economic Stability Index (ESI) incorporating house prices and stock prices as components of the measure of the inflation 
	rate in order to allow the European Central Bank (ECB) to achieve both price and macroeconomic stability. We use an optimisation approach 
	to estimate target weights for different sectoral prices in the broader price index, which depend on sectoral parameters other than those 
	used to compute the Harmonised Index of Consumer Prices applied by the ECB to gauge price stability in the euro area (EA). Our results 
	suggest that if the ECB had targeted the ESI, it would have implemented a different monetary policy which would had increased stability 
	in the EA’s economic activity and would have helped to create adequate preconditions for sustainable economic growth and job creation.
Classification-JEL:
 C32, D53, E31, E52, E58, G12, O52, R31.
Keywords:
 Stock prices; House prices; Inflation targeting; Macroeconomic stabilization; Euro area.
Creation-Date: 2017
Length: 34 pages
Number: 1707
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/wpaper17-07.txt
File-URL: https://eprints.ucm.es/id/eprint/44886/1/WP07-17.pdf
File-Format: Application/pdf
File-Function: Full text
Handle: RePEc:ucm:wpaper:1707