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

Victor Pontines and Davaajargal Luvsannyam

Working Papers from South East Asian Central Banks (SEACEN) Research and Training Centre

Abstract: 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.

Keywords: external commodity shocks; fiscal policy; real output; Mongolia (search for similar items in EconPapers)
JEL-codes: C51 E62 F41 Q43 (search for similar items in EconPapers)
Date: 2023-11
New Economics Papers: this item is included in nep-opm and nep-sea
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Working Paper: External Commodity Shocks and the Insulating Role of Fiscal Policy on Real Output: Evidence from a Commodity-Exporting Economy (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:sea:wpaper:wp51

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