Effects of global liquidity and commodity market shocks in a commodity-exporting developing economy

Gan-Ochir Doojav (), Davaajargal Luvsannyam and Elbegjargal Enkh-Amgalan

MPRA Paper from University Library of Munich, Germany

Abstract: This paper assesses the effects and transmission mechanisms of global liquidity and commodity market shocks in Mongolia, a commodity-exporting developing economy, using a structural vector autoregression (SVAR) model. Results show that boom and bust cycles in commodity and international financial markets lead to business and financial cycles in the economy as these shocks account for 30, 45, and 60 percent of domestic output, real exchange rate, and lending rate fluctuations, respectively. Commodity demand shocks have more persistent and robust effects on domestic cycles than commodity supply shocks. Trade and financial (resource export revenues, lending rate, and exchange rate) channels play an essential role in transmitting the shocks. Buoyant commodity demand and global liquidity shocks lead to a significant fall in the domestic lending rate, while positive commodity supply and global liquidity shocks appreciate the real exchange rate.

Keywords: Commodity demand shocks; Commodity supply shocks; Global liquidity shocks; Business cycle; Structural VAR; Mongolia. (search for similar items in EconPapers)
JEL-codes: C51 E32 F41 F62 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-mac and nep-opm
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Journal Article: Effects of global liquidity and commodity market shocks in a commodity-exporting developing economy (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:116831

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