Date of Award
Master of Science
This study aims to conduct a descriptive analysis of inflation targeting in Mongolia. In this context, I will assess whether the current inflation targeting practice of Mongolia is classified as a fully-fledged, eclectic, or inflation targeting lite regime. Then I will verify that Mongolia validates the prerequisites necessary for the implementation of fully fledged inflation targeting. Finally, I will proceed to a VAR model analysis aiming to describe the determinants of inflation. The results show that the inflation targeting practice of Mongolia falls in inflation targeting lite countries categorization and most of the prerequisites to adopt fully fledged inflation targeting have not been fulfilled. It would require significant improvement in the independence of the Bank of Mongolia’s operation and monetary policy decision making, modeling capabilities within the Bank of Mongolia, and financial stability. Finally, the VAR model results show a relationship among the variables, CPI, money supply, exchange rate, and GDP in Mongolia. The principal finding is that the money supply and exchange rate are more important in explaining variation in CPI than GDP in Mongolia.
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