Economic Review of Nepal <p>The Economic Review of Nepal is a biannual, single blind peer reviewed journal published by the Department of Economics, Ratna Rajyalaxmi Campus. The journal is making great efforts to publish scholarly articles on various areas of economics.</p> Department of Economics, Ratna Rajyalaxmi Campus en-US Economic Review of Nepal 2631-2174 <p>This license enables reusers to distribute, remix, adapt, and build upon the material in any medium or format for noncommercial purposes only, and only so long as attribution is given to the creator.</p> Time-Varying Association between Military Spending and Economic Growth in Nepal: Evidence From Wavelet Analysis <p>National defense is a public good, accounting for heavy public spending, and its effects on economic growth are multifaceted. The study is intended to examine the relationship between military spending and economic growth at different times and scales. The study employed wavelet coherence and partial wavelet coherence for its robustness—keeping the effects of investment and government spending aside—covering the data from 1975 to 2021 which was interpolated in quarterly form to address the frequency issues in the study. The overall findings revealed a significant negative leading association between military spending and economic growth in Nepal, except for the special context of 1976/77 and 2007 to 2009 during which it was positive. The findings indicated a stronger—and highly correlated—short-run time-frequency relationship than long-run within anti-phase and had different degrees of relationship across the frequencies or scales, excluding the special context in Nepal. This sort of time-varying and scale estimate was robust and was evident from partial wavelet coherence analysis, removing the effect of investment and government expenses from the original estimation. The study thus provides some insights to stakeholders and policymakers that they should be cautious about military spending, the institutionalization of the labor forces as a military, and the tremendous resource gap experienced in the economy of Nepal in a time-varying perspective. &nbsp;</p> Ram Prasad Gajurel Bashu Dev Dhungel Kul Prasad Lamichhane Copyright (c) 2022 Department of Economics, Ratna Rajyalaxmi Campus 2022-12-31 2022-12-31 5 1 1 17 10.3126/ern.v5i1.66034 Financial Reforms and Financial Development in Nepal: A Review <p>Effective financial systems and institutions are foundational to the economic development of any country. Recognizing this, the Government of Nepal and the Nepal Rastra Bank (NRB) have embarked on numerous reforms aimed at bolstering the banking and financial sectors. These efforts are crucial for enhancing the efficiency, accessibility, and stability of financial services, which, in turn, spur economic growth. This study conducts a thorough review of the financial sector reforms initiated primarily by the NRB, detailing their scope and impact. It explores how these reforms have shaped the financial landscape of Nepal, aiming to create a more inclusive and competitive financial environment. Additionally, the research examines the current state of financial development across Nepal's provinces, identifying disparities in financial access and efficiency. This provincial analysis is vital for understanding the uneven distribution of financial services and its implications for regional economic growth. By evaluating the effectiveness of these reforms and the status of financial development, the study provides insights into the challenges and opportunities within Nepal's financial sector. It underscores the importance of continuous reforms, regulatory enhancements, and the promotion of financial literacy to achieve comprehensive financial development. The findings highlight the progress made thus far and the ongoing need for strategic policy interventions to ensure equitable economic development across all regions of Nepal, setting a pathway for future reforms.</p> Abhishek Pandey Padma Kumar Adhikari Zenisha Shrestha Copyright (c) 2022 Department of Economics, Ratna Rajyalaxmi Campus 2022-12-31 2022-12-31 5 1 18 33 10.3126/ern.v5i1.66037 Economic Prospects of Cross-Border Electricity Trade Between Nepal and India <p>This study focuses on exploring the economic opportunities and potential challenges of cross-border electricity trade between Nepal and India. The main focus is on the transmission infrastructure, economic prospects, regulatory frameworks, and challenges involved. The study was conducted through secondary data analysis and descriptive research methods, to explore the strategic importance of electricity trade for Nepal, considering its abundant hydropower potential and geographical advantages. The existing transmission lines, infrastructure, and the role of private sector involvement in facilitating trade were examined. Moreover, the study discussed the seasonal demand variations between the two countries and the regulatory hurdles that need to be addressed for successful trade implementation. The finding highlights the potential economic benefits of electricity trade and emphasizes the need for clear guidelines, infrastructure development, and effective cooperation to overcome challenges and maximize trade’s positive impacts on economic growth and trade balance between India and Nepal.</p> Dil Nath Dangal Shiva Dutta Chapagai Krishna Prasad Ghimire Copyright (c) 2022 Department of Economics, Ratna Rajyalaxmi Campus 2022-12-31 2022-12-31 5 1 34 42 10.3126/ern.v5i1.66038 Financial Deepening in Nepal: An Asymmetric Analysis With Per Capita Income and Private Sector Credit <p>This study examines the asymmetric relationship between private sector credit and per capita income defining financial deepening using annual time-series data from 1994 to 2021. The analysis employed Zivot unit-root testing to identify a significant break in the model and NARDL cointegration analysis to account for this structural break, while also assessing the long-term asymmetric relationship. Findings suggested a cointegrating relationship with private sector credit, indicating that positive shocks in private sector credit contribute to its growth, thereby boosting per capita income and promoting financial deepening in Nepal. Although short-term negative shocks in the private sector were notable, their impact on long-term income growth was minimal. The study highlights the government's role in fostering positive growth of private sector credit to enhance financial deepening in Nepal, cautioning against excessive credit disbursement during recessions or crises, which could undermine financial deepening in the long run; however, the short-run policy revisions during the time of crises are thinkable. This study addresses a geographical gap in prior research by incorporating nonlinearity and structural break unit-root tests, previously unexplored, thereby introducing a novel contribution to the existing body of literature.</p> Aditya Pokhrel Renisha Adhikari Copyright (c) 2022 Department of Economics, Ratna Rajyalaxmi Campus 2022-12-31 2022-12-31 5 1 43 57 10.3126/ern.v5i1.66039 The Relationship between Tax and Economic Growth in Nepal <p>This study examines the relation between tax and economic growth in Nepal for the period of 1992 to 2022. The study analyzes the existence of the long-run relationship between custom duty, excise duty, value added tax and micro economic indicator GDP at current price of the Nepalese economy. The study utilized time series data analysis, using annual data covering the period of 1992 to 2020 in Nepal. The empirical results of the study, using the ARDL model, highlighted the impact of different tax indicators on economic growth. Findings indicated that a long-run (but no short-run) relationship existed between tax and economic growth in Nepal. More specifically, the results show that the custom duty and value added tax has the negative impact on the economic growth in the long run. Similarly, the result excise duty shows that positive impact on the economic growth in Nepal.</p> Ram Briksh Mandal Copyright (c) 2022 Department of Economics, Ratna Rajyalaxmi Campus 2022-12-31 2022-12-31 5 1 58 71 10.3126/ern.v5i1.66040 Editorial Vol.5(1) <p>Abstract not available.&nbsp;</p> Chakrapani Luitel Copyright (c) 2022 Department of Economics, Ratna Rajyalaxmi Campus 2022-12-31 2022-12-31 5 1