Monetary Policy in Transition: The Case of Mongolia
IMF Working Papers, January 1, 2000
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- Monetary Policy in Transition: The Case of Mongolia
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Bibliographic details
- Authors: Torsten M Sloek
- Published: January 1, 2000
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451843903.001
Summary
- The paper analyzes monetary policy in transition using Mongolia as a case study.
- Methodology includes Granger-causality tests for monetary variables and inflation, and money demand analysis using data from 22 Mongolian regions during 1993-1998.
- Core conclusion: monetary policy plays a key role in stabilization; even in a rudimentary transition economy like Mongolia, a stable money demand and a predictable relationship between inflation and monetary variables exist, implying market-based monetary policy is effective.
- Additional conclusion: there is a difference between transition and industrial economies in the elasticity of money demand with respect to activity, reflecting a larger role for transactions demand for money.
Empirical approach and data
- Granger-causality tests applied to monetary variables and inflation.
- Money demand estimation based on regional data: 22 Mongolian regions, sample period 1993-1998.
Key findings
- Monetary policy has a key role in stabilization in Mongolia.
- A stable money demand exists in Mongolia during the sample period.
- A predictable relationship between inflation and monetary variables is present.
- Market-based monetary policy is effective in a transition economy context.
- The elasticity of money demand with respect to activity differs from industrial economies, indicating:
- A larger role for transactions demand for money in transition economies.
Policy implications and recommendations
- Support market-based monetary policy frameworks in transition economies, given observed stability in money demand and predictable inflation-monetary variable relationships.
- Account for differences in money demand elasticities when designing policy: higher transactions demand implies different sensitivity of monetary aggregates to activity compared with industrial economies.
Content in this bundle
- Monetary Policy in Transition: The Case of Mongolia - WP/00/21