## Changes in Bank Lending Standards and the Macroeconomy: Evidence from Mongolia

_IMF Working Papers, December 12, 2025_

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## Bibliographic details
- Authors: Tigran Poghosyan, Davaasukh Damdinjav, Dulamzaya Batjargal, Tserendavaa Tsend-Ayush, Bat-Orgil Bat-Erdene, Gerelmaa Baatarchuluun
- Published: December 12, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229031349.001

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### Overview
- Paper examines the macroeconomic effects of credit supply shocks in Mongolia using bank credit surveys and a newly constructed indicator of changes in lending standards.
- Indicator is adjusted for macroeconomic and bank-specific factors influencing credit demand to isolate credit supply disruptions.
- Authors: Tigran Poghosyan, Davaasukh Damdinjav, Dulamzaya Batjargal, Tserendavaa Tsend-Ayush, Bat-Orgil Bat-Erdene, Gerelmaa Baatarchuluun.
- Date: December 12, 2025.
- Series: Working Paper No. 2025/262, Volume: 2025, Issue: 262, Pages: 26.
- DOI: https://doi.org/10.5089/9798229031349.001
- Stock No: WPIEA2025262
- ISBN: 9798229031349
- ISSN: 1018-5941

### Methodology
- Data sources: bank credit surveys.
- Construction: a newly constructed indicator of changes in lending standards adjusted for macroeconomic and bank-specific factors influencing credit demand.
- Identification strategy: isolate credit supply shocks by purging demand fluctuations using the adjusted lending-standards indicator.
- Decomposition: separate credit supply shocks into enterprise and household lending components to assess differential macroeconomic impacts.

### Key Findings
- A one standard deviation shock to credit supply leads to an initial reduction in:
  - total lending growth;
  - output growth;
  - inflation.
- Decomposed effects:
  - Shocks to enterprise lending reduce enterprise lending growth and affect inflation more strongly.
  - Shocks to household lending reduce household lending growth and have a stronger impact on output growth.
- Variance decomposition indicates that adjusted credit supply shocks purged from demand fluctuations hold significant explanatory power for the variability of macroeconomic variables.
- Overall conclusion: results confirm the importance of credit supply shocks for macroeconomic variables in Mongolia.

### Variance Decomposition and Relative Importance
- Adjusted credit supply shocks (purged of demand fluctuations) are significant in explaining the variability of:
  - lending growth (total and by sector);
  - output growth;
  - inflation.
- Relative impacts:
  - Household credit supply shocks → stronger impact on output growth.
  - Enterprise credit supply shocks → stronger impact on inflation.

### Implications
- Empirical confirmation that credit supply disruptions materially affect Mongolia’s macroeconomic performance through lending, output, and price dynamics.
- Sectoral differentiation matters: enterprise vs. household credit supply channels have distinct macroeconomic effects, implying that monitoring and policy responses should account for the composition of credit supply shocks.

*Source: IMF Working Paper "Changes in Bank Lending Standards and the Macroeconomy: Evidence from Mongolia", Working Paper No. 2025/262 (December 12, 2025).*

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_Source: https://www.imf.org/en/publications/wp/issues/2025/12/12/changes-in-bank-lending-standards-and-the-macroeconomy-evidence-from-mongolia-572482_