A Model for Stress Testing Household Sector in Mongolia

Authors: Ariun-Erdene Bayarjargal , Gan-Ochir Doojav

Source: Economic research institute

Language: English

Keywords: Stress tests, household indebtedness, household surveys, Mongolia.

Date: 2017-02-01

This paper outlines a simulation-model for stress-testing 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, and the associated increases in household loan losses due to interest rate and basic consumption price shocks are considerable. The results show that 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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