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(WP2/2023)External Commodity Shocks and the Insulating Role of Fiscal Policy on Real Output: Evidence from a Commodity-Exporting Economy

Publish Date: : November 2023
Authors:: Victor Pontines and Davaajargal Luvsannyam

Summary

This study investigates the role of fiscal policy in stabilising resource-rich economies vulnerable to external  commodity  shocks, with a specific focus on Mongolia.  We analyse the effects of various external  commodity  shocks on Mongolia’s economy and  find that fiscal policy’s responses  to these  shocks have  been  counter-cyclical.  Additionally, we construct policy counterfactuals to examine  the  insulating role of fiscal policy on real domestic  output.  The  findings reveal  that counter-cyclical fiscal measures,  particularly government expenditure, and  to  a lesser extent, government revenue,  played  an  important role in Mongolia’s response to  external  commodity shocks.

The South East Asian Central Banks (SEACEN)Research and Training Centre 198201000672 (80416-M)

 

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