Monetary and macroprudential policies in a model with housing

The coordination of monetary and macroprudential policies in stabilizing housing market shocks continues to be a critical unresolved debate. This leaves Africa’s high-debt emerging markets vulnerable to systemic risks and housing wealth volatility. There is a growing body of literature exploring new policy instruments that could be more effective in achieving financial stability. This need for efficiency and the correct macroprudential instrument underpins this study, which focuses on testing the joint use of two macroprudential instruments alongside monetary policy. To address this gap, the study employs a Dynamic Stochastic General Equilibrium (DSGE) model calibrated to the South African economy. Furthermore, the study evaluates the effectiveness of monetary policy and the macroprudential tools, specifically the Loan-toValue (LTV) ratio and the Countercyclical Capital Buffer (CCyB) in a model with housing. Findings suggest that coordination reduces house price volatility, where LTV i