This paper outlines a simulation-model for stress-testing the household sector in Mongolia.
The model uses data from the Household Socio-Economic Survey (HSES) to assess the financial resilience of households to macroeconomic shocks. The model suggests that the household sector is vulnerable to scenarios involving interest rate, basic consumption price, asset price and unemployment rate shocks. The model shows that the associated increases in household loan losses due to interest rate and basic consumption price shocks are considerable.
The results show that the substantial increase in household indebtedness has increased the household sector’s financial fragility. This paper provides a useful starting point for the development of a more holistic stress-testing framework for the Mongolian banking system.
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