What are its advantages and disadvantages

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The Office for National Statistics (ONS) in the UK last year proposed a new price index-a CPI that includes housing costs-called the CPIH. The rationale given for this proposal is that "the biggest cost for most homeowners is the cost of repaying their mortgage. But mortgage interest payments are not included in the CPI, nor are a variety of other costs, such as house depreciation, buildings insurance and ground rent, and house transaction costs such as estate agents' fees, survey costs and conveyancing charges. Council tax is not included in the CPI either."

Briefly evalute this proposal. What are its advantages and disadvantages? How do you think the CPIH would have behaved in the past 5 years relative to the CPI? Would the CPIH be a useful inflation target measure?

Reference no: EM132550775

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