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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.
Mongolia has made impressive progress in developing its economy over the past ten years. Medium-term prospects are promising as mining output is projected to expand by more than 20 percent per annum, on average, over the next five years. However, the prospects for sustained, rapid and inclusive non-mineral growth depend on the implementation of the stability-oriented fiscal framework that has been adopted in the aftermath of the 2008/09 balance of payments (BOP) crisis. This framework was designed to dampen volatility, mitigate risks to economic and financial stability, and strengthen long-term natural resource management. The expansionary fiscal policy of the past year is causing double-digit inflation and BOP pressures. Public spending needs to be reined in, in order not to risk undermining stability and growth prospects, and in view of Mongolia’s vulnerability to a downturn in commodities exports.
This is the first comprehensive study in the context of EMDEs that covers, in one consistent framework, the evolution and global and domestic drivers of inflation, the role of expectations, exchange rate pass-through and policy implications. In addition, the report analyzes inflation and monetary policy related challenges in LICs. The report documents three major findings: In First, EMDE disinflation over the past four decades was to a significant degree a result of favorable external developments, pointing to the risk of rising EMDE inflation if global inflation were to increase. In particular, the decline in EMDE inflation has been supported by broad-based global disinflation amid rapid international trade and financial integration and the disruption caused by the global financial crisis. While domestic factors continue to be the main drivers of short-term movements in EMDE inflation, the role of global factors has risen by one-half between the 1970s and the 2000s. On average, global shocks, especially oil price swings and global demand shocks have accounted for more than one-quarter of domestic inflation variatio--and more in countries with stronger global linkages and greater reliance on commodity imports. In LICs, global food and energy price shocks accounted for another 12 percent of core inflation variatio--half more than in advanced economies and one-fifth more than in non-LIC EMDEs. Second, inflation expectations continue to be less well-anchored in EMDEs than in advanced economies, although a move to inflation targeting and better fiscal frameworks has helped strengthen monetary policy credibility. Lower monetary policy credibility and exchange rate flexibility have also been associated with higher pass-through of exchange rate shocks into domestic inflation in the event of global shocks, which have accounted for half of EMDE exchange rate variation. Third, in part because of poorly anchored inflation expectations, the transmission of global commodity price shocks to domestic LIC inflation (combined with unintended consequences of other government policies) can have material implications for poverty: the global food price spikes in 2010-11 tipped roughly 8 million people into poverty.
Almost 10 years ago the mineral-rich country of Mongolia experienced very rapid economic growth, fuelled by China’s need for coal and copper. New subjects, buildings, and businesses flourished, and future dreams were imagined and hoped for. This period of growth is, however, now over. Mongolia is instead facing high levels of public and private debt, conflicts over land and sovereignty, and a changed political climate that threatens its fragile democratic institutions. Subjective Lives and Economic Transformations in Mongolia details this complex story through the intimate lives of five women. Building on long-term friendships, which span over 20 years, Rebecca documents their personal journeys in an ever-shifting landscape. She reveals how these women use experiences of living a ‘life in the gap’ to survive the hard reality between desired outcomes and their actual daily lives. In doing so, she offers a completely different picture from that presented by economists and statisticians of what it is like to live in this fluctuating extractive economy.
This publication examines Mongolia’s recent economic development and outlines reforms that would help the country take advantage of its many opportunities. Mongolia is rich in natural resources and, although landlocked, is well-placed to boost trade with its two giant neighbors. The country needs to diversify its economy beyond mining, enhance economic stability, and increase employment. To maximize Mongolia’s potential the government can improve macroeconomic management, enhance the skill base, and provide hard and soft infrastructure to promote trade and efficient logistics. Governance and institutional reforms are also crucial. The government will need to continue to drive reforms so that they are well implemented and deliver the intended change.
This paper investigates the response of consumer price inflation to changes in domestic fuel prices, looking at the different categories of the overall consumer price index (CPI). We then combine household survey data with the CPI components to construct a CPI index for the poorest and richest income quintiles with the view to assess the distributional impact of the pass-through. To undertake this analysis, the paper provides an update to the Global Monthly Retail Fuel Price Database, expanding the product coverage to premium and regular fuels, the time dimension to December 2020, and the sample to 190 countries. Three key findings stand out. First, the response of inflation to gasoline price shocks is smaller, but more persistent and broad-based in developing economies than in advanced economies. Second, we show that past studies using crude oil prices instead of retail fuel prices to estimate the pass-through to inflation significantly underestimate it. Third, while the purchasing power of all households declines as fuel prices increase, the distributional impact is progressive. But the progressivity phases out within 6 months after the shock in advanced economies, whereas it persists beyond a year in developing countries.
Pre-modern critical interactions of nature and society can best be studied during the so-called "Crisis of the 14th Century". While historiography has long ignored the environmental framing of historcial processes and scientists have over-emphasized nature's impact on the course of human history, this volume tries to describe the at times complex modes of the late-medieval relationship of man and nature. The idea of 'teleconnection', borrowed from the geosciences, describes the influence of atmospheric circulation patterns often over long distances. It seems that there were 'teleconnections' in society, too. So this volumes aims to examine man-environment interactions mainly in the 14th century from all over Europe and beyond. It integrates contributions from different disciplines on impact, perception and reaction of environmental change and natural extreme events on late Medieval societies. For humanists from all historical disciplines it offers an approach how to integrate written and even scientific evidence on environmental change in established and new fields of historical research. For scientists it demonstrates the contributions scholars from the humanities can provide for discussion on past environmental changes.
Why are carefully designed, sensible policies too often not adopted or implemented? When they are, why do they often fail to generate development outcomes such as security, growth, and equity? And why do some bad policies endure? World Development Report 2017: Governance and the Law addresses these fundamental questions, which are at the heart of development. Policy making and policy implementation do not occur in a vacuum. Rather, they take place in complex political and social settings, in which individuals and groups with unequal power interact within changing rules as they pursue conflicting interests. The process of these interactions is what this Report calls governance, and the space in which these interactions take place, the policy arena. The capacity of actors to commit and their willingness to cooperate and coordinate to achieve socially desirable goals are what matter for effectiveness. However, who bargains, who is excluded, and what barriers block entry to the policy arena determine the selection and implementation of policies and, consequently, their impact on development outcomes. Exclusion, capture, and clientelism are manifestations of power asymmetries that lead to failures to achieve security, growth, and equity. The distribution of power in society is partly determined by history. Yet, there is room for positive change. This Report reveals that governance can mitigate, even overcome, power asymmetries to bring about more effective policy interventions that achieve sustainable improvements in security, growth, and equity. This happens by shifting the incentives of those with power, reshaping their preferences in favor of good outcomes, and taking into account the interests of previously excluded participants. These changes can come about through bargains among elites and greater citizen engagement, as well as by international actors supporting rules that strengthen coalitions for reform.
Inflation rates rose sharply in the Philippines during 2018. Understanding the demand and supply sources of inflation pressures is key to monetary policy response. Qualitatively, indicators have pointed to evidence of inflation pressures from both sides in 2018, with the supply factors, by and large, associated with commodity-price shocks and demand factors deduced from gleaning at the wider non-oil trade deficits seen in the Philippines. Quantitatively, we deploy a semi-structural model to decompose the contributions of various shocks to inflation. Our main findings are (1) supply factors (mainly global commodity prices) played a prominent role in explaining the rise in inflation in 2018; (2) demand factors also contributed to inflation in a non-negligible way, justifying the need for tighter monetary policy in 2018; (3) the size of the estimated output gap (an important indicator of demand pressures) could be larger, when considering the widening trade deficits in 2018; and (4) a delayed monetary policy tightening can be costly in terms of higher inflation rates, requiring larger and more aggressive interest rate hikes to bring inflation under control, based on a counterfactual exercise.
Singapore entered the COVID-19 pandemic with sizable policy space and robust economic policy frameworks, yet facing longer-term challenges. The economy has been severely impacted by the pandemic, but a bold, comprehensive, and coordinated policy package has helped cushion the economic fallout. Following a record contraction in the first half of 2020, activity has rebounded, and growth is projected to strengthen to 6 percent in 2021, underpinned by a recovery in domestic demand and a positive contribution from net exports. The uncertainty surrounding the outlook is larger than usual.