This paper examines the interactions between financial conditions and business cycles in Mongolia, a small open economy, heavily depending on commodity exports. We construct two financial conditions indexes based on the reduced form IS model and the vector autoregression (VAR) model as surveillance tools to quantify the degree of the financial conditions. We find that real short-term interest rate and real effective exchange rate gap get a higher weight in the FCIs. Both business and financial cycles are often more pronounced in Mongolia, and financial condition is dependent of the financial and monetary policies in place. The analysis of the predictive power of the FCIs for business cycles shows that they have predictive information for the near-term economic activities. FCIs are also helpful in signaling inflation turning points.

中文翻译：

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蒙古的财务状况与商业周期之间的关系

本文研究了蒙古的财务状况与商业周期之间的相互作用，蒙古是一个小开放的经济体，在很大程度上取决于商品出口。我们基于简化形式的IS模型和向量自回归（VAR）模型构建了两个财务状况指标作为监视工具，以量化财务状况的程度。我们发现，实际短期利率和实际有效汇率差距在FCI中的权重更高。在蒙古，商业周期和金融周期通常更为明显，财务状况取决于所采用的财务和货币政策。对FCI对商业周期的预测能力的分析表明，它们具有对近期经济活动的预测信息。FCI还有助于告知通胀转折点。