Monetary Policy and Housing Affordability in Emerging Markets: A Cross Country Analysis

Abstract

Housing affordability is becoming an increasingly crucial socio-economic issue in many developing nations through its entrenchment in macroeconomic instability, rapid urbanization, and lack of access to financial resources. This study investigates how monetary policy affects housing affordability in four key emerging economies-Brazil, Turkey, South Africa, and Indonesia. In conducting this, it uses Structural Vector Autoregression (SVAR) to analyze dynamic interactions between interest rates, inflation, real growth in GDP, exchange rates, and housing affordability using quarterly data on the period from 2000 to 2023. The study adopts recursive Cholesky decomposition for identification of structural shocks and tracing monetary transmission mechanisms. Findings will show how dissimilar institutional settings, such as mortgage market depth and urban growth rates, shape the money effectiveness. This comparative approach would provide both theoretical and policy insight highlighting the nuanced role that monetary policy plays in tackling housing affordability issues in varied economic contexts.