EXCESSIVE ASSET price volatility, especially in real estate markets, has been associated with financial crises. The purpose of this study is to propose a house price index methodology that will be suitable in the case of Lesotho. The study explored several property indices and establishes that the proper methodology that can be adopted in Lesotho is the classified median price index. Data unavailability in Lesotho excluded other house price index methodologies identified in the literature. Therefore, the study recommends that the Central Bank of Lesotho should adopt the median price index methodology in its attempt to develop a house price index for Lesotho. This recommendation leverages on the following advantages of the median price index. First, this methodology reports the average or median price of houses sold in each time period and does not require characteristics on the house sold. Second, it is easy to compute and third, it uses readily available data from mortgage loans provided by the banking sector

THIS PAPER investigates the macroeconomic effects of fiscal policy shocks in Lesotho on output gap, consumer prices, private and public gross fixed capital formation and the interest rate spread under a structural vector autoregression (SVAR) framework using annual time series data from 1982 to 2015. The main results of the study show that a positive shock to government expenditure leads to a significant positive response in inflation. However, the effect on all other variables is insignificant. A positive shock to government revenue has no impact on the output gap and the interest rate spread but results in an increase in consumer prices, government expenditure as well as public and private gross fixed capital formation. It is recommended that government expenditure should be tilted towards the productive sectors of the economy. Government revenue should be increased by widening the revenue base and more efficient methods of revenue collection.