Macroeconomic modeling for optimal stabilization policy in Mongolia

Doojav, Gan-Ochir (2021): Macroeconomic modeling for optimal stabilization policy in Mongolia.

Abstract

This paper develops three macroeconomic models such as large structural VAR, DSGE-based structural VAR and GAP models for Mongolia, a developing and commodity-exporting economy. All models are estimated using Bayesian methods on the quarterly data. Results suggest that (i) external shocks (i.e., China’s economic activity, commodity prices and FDI) are important sources of macroeconomic volatility in Mongolia, (ii) combining macroprudential and monetary policy measures is important in welfare loss by ensuring both macroeconomic and financial stability, and (iii) equilibrium values for inflation, growth, unemployment rate and real interest rate are estimated as 6 percent, 5 percent, 8 percent, and 3.5 percent for Mongolia, respectively. The paper also provides recommendations for macroeconomic stabilization policy.

• Item Type: MPRA Paper
• Language: English
• Keywords: External shocks, Open economy macroeconomics, Optimal stabilization policy, Bayesian analysis
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C11 - Bayesian Analysis: General; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy ; Stabilization ; Treasury Policy; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance

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