The Impact Of The Exchange Rate Movement On Mongolian Import

This study explores an empirical analysis of the effect of the exchange rate onMongolian import rate. I used the import demand function combine with the gravityequation model to determine if the transportation cost impacts on the level ofMongolian import. This gravity model is used to estimate the relationship betweenexchange rate, income, distance, and import for Mongolia and its seven majorexporting countries, including bordered countries: China and Russia, as well as USA,United Kingdom, Japan, South Korea and Germany; using quarterly cross-countrypanel data for the period from1999to2012. This study supposes that the foreigncurrency exchange rate movement has had either positive or negative impact on theMongolian imports. Also the study examines the effect on Mongolian income growth,foreign countries GDP, and the impact of distance between two countries on theMongolian import demand.According to the estimates of the gravity equation for processing imports, theestimated coefficient of Mongolia’s GDP is and statistically signifcant at1%;the estimated coeffcient of the trading partners’ GDP is and also signifcantat1%. The estimated coefficient of Dummy, common land border, is1.903594,positive and significant at5%. But the estimated distance between two countries andexchange rate elasticity of imports are0.447and0.185but not statistically signifcant.We found GDP growth can improve the import rate in Mongolia, however, noevidence of exchange rate impact on import.