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Inflation Dynamics in Mongolia: Understanding the Roller Coaster

  • Julia Bersch
  • Steven Barnett
  • Yasuhisa Ojima

Inflation in Mongolia resembles a roller coaster ride with sharp rises and steep drops. Understanding why is critical for formulating and assessing monetary policy. Food prices are found to be a key driver of inflation, and, not surprising given Mongolia’s geography, are determined primarily by local supply conditions, highly seasonal, and subject to large but short-lived shocks (usually weather related). Nonetheless, demand factors are also found to be significant in explaining price movements and empirical evidence suggests that a 10 percent increase in government wages, for example, would push up underlying inflation by 1 percentage point. So, while inflation will remain volatile due to agricultural shocks, there is space for macroeconomic stabilization policy to help reduce inflation volatility.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/192.

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Length: 21
Date of creation: 01 Jul 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/192
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  1. Jeannine Bailliu & Daniel Garcés & Mark Kruger & Miguel Messmacher, 2003. "Explaining and Forecasting Inflation in Emerging Markets: The Case of Mexico," Working Papers 03-17, Bank of Canada.
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