Rising house prices and monetary policy

It is argued that the recent rise in house prices is the biggest Önancial asset price boom in history. In this note, I look at how house prices are determined and how house price bubbles can occur. I discuss whether the recent increase in house prices is a bubble, whether monetary policy can cause a rise in the price of houses relative to other goods and what central banks should do in response to house price bubbles. Finally, I consider how central banks should take account of house prices in the price index used by central banks to measure ináation