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sharing in governance of extractive industries

NRGI has developed a new tool linking resource sector developments to a detailed picture of Mongolia’s economy and budget in order to inform ongoing discussions on pressing fiscal issues and long-term sustainability.

It incorporates project level models of the country’s five largest mine, a semi structural macroeconomic model and detailed budget forecasts.  It projects a baseline scenario of the economy and describes how different shocks or policy changes would impact the trajectory of key macroeconomic and fiscal variables over a 30-year horizon.

Macro-fiscal models with similar aims have been regularly built by public agencies, international organizations and by the private sector. However, this model has a number of innovative features that make it distinct.

  • Macroeconomic models are used regularly in OECD economies; far fewer have been used in developing countries. Difficulties in obtaining reliable data, more limited resources to build and maintain such tools, and less experience in how they can be best used might all be potential contributing reasons for this. One aim of this tool is to support regular analysis of Mongolia’s economic sustainability.
  • Most such models do not adequately address the significance and particularities of the natural resource sector. While many other sectors experience volatility, changes in expansion plans, tax terms, or the delays in mining mega-projects can have very large ramifications. By incorporating simplified financial models from the country’s five largest mines, this model bridges the growing repository of financial models of mines, such as the open model of the Oyu Tolgoi mine and macroeconomic models.
  • Most such macroeconomic models are not publicly available. While some include a description of the model, main equations employed, key results and some parameters describing the robustness of the results, in very few instances is the full model made public. This model is open to wider reuse, scrutiny and adaptation.
  • Most such models are made with proprietary and hard-to-access software. The computationally heavy nature of modeling has led to a flourishing of dedicated tools for experts. These tools are both expensive and difficult to learn. This model is available in Microsoft Excel format and with a user-friendly interface, so that it can reach new users inexperienced with macroeconomic models.

 

Using the model, we have conducted a training and a policy roundtable in Ulaanbaatar in November to discuss preliminary findings with both technical experts and policy makers. With our partners in Mongolia, we will now use it again to assess the impact of a new IMF bailout package unveiled last week.

You can find it at http://resourcegovernance.org/analysis-tools/tools/mongolia-macro-f...

Please feel free to use, share and give us feedback.

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