Exchange rate pass-through effect and monetary policy in Mongolia: Small open economy DSGE model

This study is carried out in a small open economy New Keynesian DSGE model proposed by Monacelli (2005). As a result, firstly the exchange rate pass-through into import price and inflation is 0.69% and 0.49% respectively in short run. Secondly, the exchange rate acts as a shock absorber for domestic productivity and foreign demand shock. Thirdly, in case of incomplete passthrough the central bank of Mongolia is required to adjust the nominal interest rate more under the productivity shock. Therefore, considering incomplete pass- through is significant to improve the effectiveness of the monetary policy for the central bank of Mongolia. (C) 2015 The Authors. Published by Elsevier B.V.