Economic Growth in Nepal: Macroeconomic Determinants, Trends and Cross-Country Evidences
Journal of World Economic Research
Volume 9, Issue 1, June 2020, Pages: 76-82
Received: Feb. 24, 2020;
Accepted: Apr. 20, 2020;
Published: May 19, 2020
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Luna Ghimire, Ace Institute of Management (AIM), Pokhara University, Pokhara, Nepal
Ajay Kumar Shah, Ace Research Centre, Ace Institute of Management (AIM), Pokhara University, Pokhara, Nepal
Ram Kumar Phuyal, Centre for Economic Development and Administration (CEDA), Tribhuvan University, Kirtipur, Nepal; National Planning Commission, Government of Nepal, Kathmandu, Nepal
Using time series data of the last twenty-seven years (1990 to 2016), this study tries to go in-depth regarding the relationship between macroeconomic variables and its impact on economic growth of Nepal. Further, this study also compares the economic growth of Nepal with six Asian countries such as Bangladesh, Bhutan, China, India, Pakistan and Sri Lanka. The study is based on secondary data which are extracted from a legitimate source of World Bank. The dependent variable of this study is Gross Domestic Product (GDP) growth (annual%). To observe the GDP growth, some independent variables like exchange rate, export of goods and services, Foreign Direct Investment (FDI) net flow, Gross Fixed Capital Formation (GFCF), import of goods and services and inflation are chosen. Based on the variables, statistical tools such as multiple linear regression, Karl Pearson's correlation, and trend analysis are run. As per the result, exchange rate, GFCF, and import have a significant impact on the economic growth of Nepal while export, FDI, and inflation do not have a significant impact. Further, the cross-country evidence shows that Bangladesh and India have a significant positive GDP growth trend, while Bhutan and Sri Lanka have a positive GDP growth trend but do not have a significant growth. Also, China, Nepal, and Pakistan do not have a significant growth and their growth trend is negative. Based on the results and analysis it is suggested that a strong exchange rate leads low cost of production with cheap imports and also helps to control inflation due to low prices of foreign goods and services. In this context, the policymaker should initiate to make tight policies against the reduction of inflation in the country.
Ajay Kumar Shah,
Ram Kumar Phuyal,
Economic Growth in Nepal: Macroeconomic Determinants, Trends and Cross-Country Evidences, Journal of World Economic Research.
Vol. 9, No. 1,
2020, pp. 76-82.
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