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Impact of Fiscal Consolidation on the Mongolian Economy

Ragchaasuren Galindev, Tsolmon Baatarzorig, Nyambaatar Batbayar, Delgermaa Begz, Unurjargal Davaa and Oyunzul Tserendorj

Working Papers MPIA from PEP-MPIA

Abstract: The Government of Mongolia began implementing an IMF program under the Extended Fund Facility agreement (EFF) in May 2017. Under the program, the government has decreased expenditures and increased taxes to achieve debt sustainability via fiscal consolidation and stable growth. At the same time, the government has faced challenges because of its commitment of fiscal consolidation to the IMF: the rising price of fuel and its own fuel-subsidy policies. We used the PEP standard static CGE model to examine the impact of fiscal consolidation on the Mongolian economy under various conditions. Moreover, we used a poverty (microsimulation) model to analyze those impacts at a household level. Our analysis of the impact of fiscal consolidation under pessimistic and optimistic mineral-commodity-price scenarios showed that Mongolia’s economy was closely tied to international commodity prices. Our examination of the government’s alternative policies on fuel subsidies in an environment of fiscal consolidation demonstrated that the effect of increased fuel prices on the economy depended upon government fuel-subsidy policy.

Keywords: CGE model; Mongolian economy; Mining; Fiscal consolidation (search for similar items in EconPapers)
JEL-codes: D58 E62 I32 Q33 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-cmp, nep-ene, nep-mac and nep-tra
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