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Growth diagnostics for a resource-rich transition economy : the case of Mongolia

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  • Ianchovichina, Elena
  • Gooptu, Sudarshan

Abstract

This paper uses a growth diagnostics approach à la Hausmann, Rodrik, and Velasco (HRV) to identify the most'binding'constraints to private sector growth in Mongolia - a small, low-income, mineral-rich, transition economy. The approach of applying the HRV methodology is useful in those cases where a lack of data prevents us from estimating shadow prices to identify the most'binding'constraint to growth. We find that although Mongolia is not liquidity constrained and has grown rapidly in recent years, economic growth has been narrowly based. Investment has flowed mainly into a small number of firms operating in mining and construction. The low level of private investment in sectors outside mining and construction has been due to low returns - a result of costly and unreliable transportation services; lengthy and complex transit procedures, including customs and trade rules; distortionary taxes; coordination failures, at both domestic and international levels; and growing corruption. Poor financial intermediation is also a problem that has kept the cost of finance high, although lower than in previous years. Alleviating these binding constraints will ensure that Mongolia maintains the path towards sustained, broad-based growth.

Suggested Citation

  • Ianchovichina, Elena & Gooptu, Sudarshan, 2007. "Growth diagnostics for a resource-rich transition economy : the case of Mongolia," Policy Research Working Paper Series 4396, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4396
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    Citations

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    Cited by:

    1. repec:wsi:jdexxx:v:15:y:2010:i:01:n:s1084946710001427 is not listed on IDEAS
    2. Ronnås, Per., 2011. "Challenges for achieving job-rich and inclusive growth in Mongolia," ILO Working Papers 994658443402676, International Labour Organization.
    3. repec:ilo:ilowps:465844 is not listed on IDEAS
    4. Dragan TEVDOVSKI & Vladimir FILIPOVSKI & Igor IVANOVSKI, 2014. "A Diagnostics Approach To Economic Growth In Small Open Economies: The Case Of The Republic Of Macedonia," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 13, pages 47-68, June.
    5. Yaroslava Babych & Michael Fuenfzig, 2012. "An Application of the Growth Diagnostics Framework: The Case of Georgia," Working Papers 001-12, International School of Economics at TSU, Tbilisi, Republic of Georgia.

    More about this item

    Keywords

    Transport Economics Policy&Planning; Debt Markets; Economic Theory&Research; Emerging Markets;

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