The Asset - Magazine-Mongolia: what drives the togrog?: "Before the global financial crisis (GFC), Mongolia’s central bank, Mongol Bank, heavily managed the togrog-US dollar exchange rate. We have ascribed aspects of the economy’s performance, in particular the very rapid growth in the money and credit aggregates, to MB’s failure to allow the togrog to appreciate more when commodity prices began to rise in 2002. Overly accommodative monetary conditions fuelled a credit boom. The economy’s vulnerability was harshly exposed when commodity prices plunged in the second half of 2008.
We think the authorities at Mongol Bank have changed their behaviour since the GFC. A glance at Figure 1, which depicts the togrog-USD exchange rate, suggests it has been more volatile since the GFC. More rigorous statistical analysis confirms this. The standard deviation of the exchange rate was 36.7 in the pre-GFC period (2002 until June 2008) and 82.8 after (July 2009 until the latest data). The increase in volatility is statistically significant."
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