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The political economy of central bank’s quasi-fiscal operations implemented for 2012-2016 in Mongolia

Doojav, Gan-Ochir (2018): The political economy of central bank’s quasi-fiscal operations implemented for 2012-2016 in Mongolia.

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Abstract

This paper reviews issues associated with quasi-fiscal operations of the Bank of Mongolia (BOM) implemented during the period 2012-2016 in context of political economy. Under the quasi-fiscal operations, the BOM injected about MNT 7 trillion (which is equivalent to 40 percent of GDP) into the economy over the period 2012-2016. The politically driven quasi-fiscal operations to buffer the economy from external shocks supported growth for a while, but at the cost of increasing economic vulnerabilities. Several lessons are learned from the quasi-fiscal operations. The case study of Mongolia supports the view that politics leads to the economic fluctuations not only through fiscal policy, but also through monetary policy in developing countries.

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