Because of the diversity of the economy, prices behave differently across sectors and geographical areas.
As I explained long ago, the idea behind core inflation is that not all prices behave the same.
"Not only are regional house prices behaving very differently, but alternative house price indices can give very different signals about the strength of the market as a whole".
After all, the two countries are both part of the Schengen area, which makes it easy to zip between them; and Dutch citizens who live in Germany but work at home can still opt to pay Dutch income tax, mortgage-interest deductibility and all.Sure enough, the authors do find that prices behave differently close to the border (see chart).
In Fig. 7, we observe that the simulated and theoretical prices behave in a similar way.
Thus, energy prices have behaved as something of a thermostat on the economy.
Although these numbers come from an association that has a vested interest in making the housing market look healthy, they do provide a roughly accurate picture of how housing prices have behaved in the past six years.
For those who think that housing prices will imitate the stock chart of a dotcom stock, the newspaper's chart provides a revealing picture of how real estate prices have behaved in one of the historically hottest markets in the country.
Since then, median household income growth has muddled along, while home prices have behaved like an addict on a meth bender: climbing to dangerous heights in 2006, crashing through the floor over the next few years, and now rising sharply again.
And the answer is no — wages (and many prices) don't behave like that.
