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Policy Study Inflation Expectations Through the Lens of the Slack in the Real Estate Asset Market December 30, 2023

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Series No. 2023-02

Policy Study KOR Inflation Expectations Through the Lens of the Slack in the Real Estate Asset Market #Inflation, Interest Rates, and Monetary Policy #Macroprudential Policy #Real Estate
DOIhttps://doi.org/10.22740/kdi.ps.2023.02 P-ISBN979-11-5932-847-3 E-ISBN979-11-5932-855-8

December 30, 2023

  • 프로필
    Duksang Cho
Summary
This study examines inflation expectations implied in the real estate asset market. Land is an asset that accounts for more than half of South Korea's national wealth and, like labor, is an essential input factor despite its inelastic supply. Based on this idea, we examine whether a similar regularity as the Phillips curve observed in the labor market is also observed in the real estate asset market. The main results are as follows. First, an increase in the relative price of land can be a pass-through, transferring inflationary pressure over the years. Second, comparing the existing expected inflation indices, an expected inflation rate extracted from the real estate asset market can provide additional information. Third, theoretical analysis shows that the relative price of land and expected inflation can be positively correlated in general equilibrium.
Contents
Preface
Executive Summary

Chapter 1 Introduction

Chapter 2 The Correlation Between Real Estate Asset Markets and Inflation
 Section 1 The Relative Value of Real Estate Assets as a Multiplier of National Wealth relative to Gross Domestic Product,
 Section 2 Visual Cues

Chapter 3 The Relative Value of Real Estate Assets as a Proxy for Inflation Expectations
 Section 1 Prediction and Explanatory Power for Future Inflation
 Section 2 The Consistency with the New Keynesian Phillips Curve Considering Inflation Expectations
 Section 3 Consumption and its Impact on Inflation

Chapter 4 Theoretical Discussion
 Section 1 Real Estate Asset Prices, Household Credit, and the Quantity Theory of Money
 Section 2 Real Estate Asset Market Equilibrium Conditions and Inflation Expectations

Chapter 5 Concluding Remarks

References
Appendix
ABSTRACT
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