The housing price boom of the late ’90s: did inflation targeting matter?

The recent boom in housing markets of most developed economies has spurred criticism that inflation targeting central banks may have neglected the build-up of financial imbalances. This paper provides a formal empirical test of such claims, using a standard program evaluation methodology to correct for a possible bias due to self-selection into inflation targeting. We consider 17 industrial economies over 1980-2006, among which nine countries have targeted inflation a some dates. We find robust evidence of a significant positive effect of inflation targeting on real housing price growth and on the housing price to rent ratio.