The impact of non-bank financial institutions on economic growth in Mongolia

In recent decades, the structure of financial intermediation has changed dramatically. Banks' stake of the financial system is decreasing, while non-banks' involvement is expanding, and this tendency is particularly noticeable in Mongolia. The shifting structure of financial intermediation has piqued monetary authorities' interest, as it has the potential to alter the way monetary policy is conveyed to the economy. The purpose of this study is to look at the impact of non-banking financial institutions on Mongolian monetary policy transmission. Using time series data from 2000 to 2022 (https://thedocs.worldbank.org/en/doc/af1a0293254ac2e448cafa165c669d88-0070012022/original/MEU-2022-April-ENG.pdf ), this research intends to empirically investigate the development impact of Non-Bank Financial Intermediaries on Mongolian economic growth.Non-bank financial activities are defined as services provided by a business entity that has secured a license from the Bank of Mongolia, as defined in article 7.1 of the present law. The study investigates the existence of a long run equilibrium link between NBFIs and economic development using a limits testing technique to cointegration and an error correcting mechanism. The analysis discovers that NBFIs and real per capita income have a long-run cointegrating connection. According to economic theory, solid and efficient financial systems—banks, equities markets, and bond markets—that route capital to its most productive uses promote economic growth. Since the early 1990s, the financial systems of the region have developed deeper and more diversified, according to the data. Financial development has a strong beneficial effect on growth, especially in emerging nations, according to a more rigorous econometric analysis of 125 countries' panel data. The findings also show that the influence of financial development on regional growth is similar to that of other regions, and that the impact has reduced since the Asian financial crisis. Overall, our research supports the assumption that continued financial sector development is important for developing Asia's post-crisis growth. However, the primary role of financial sector development in growth is likely to change away from mobilizing funds and so increasing investment volume and toward improving investment efficiency and thereby contributing to improved overall productivity. The study suggests that the role of NBFIs and their value to the economic growth process are more pronounced in countries with more developed financial systems. As a result, strategies aimed at strengthening the NBFI sector are required, considering their ability to contribute to economic growth