Economic Review of Nepal

Editorial Vol.4(1)

Chakrapani Luitel — 2021-12-31

Abstract not available.

Asymmetrical and Symmetrical Relationship between Financial Sector Development and Economic Growth: Evidence From Nepal

Ram Prasad Gajurel — 2021-12-31

The financial sector plays a pivotal role in accumulating and mobilizing funds within the economy, the sector that produces feedback effects for the economic progress of the nation. This paper examines the symmetrical and asymmetrical relationship between financial sector development and economic growth in Nepal. With time series data spanning from 1975 to 2019 AD, both symmetric autoregressive distributed lag (ARDL) and asymmetric effect ARDL (NARDL) models were employed in this paper. Furthermore, the study applied principal component analysis (PCA) to develop the financial sector development indicator. The findings revealed the pivotal role of financial sector development in driving economic growth in Nepal, although significant negative asymmetrical effects posed challenges to long-term growth. Additionally, alongside financial sector progress, factors—such as inflation and learning by doing—contributed to growth, while trade alone failed to have sufficient potency to spur economic expansion. While financial sector development enhanced Nepal's productive capacity, it was not observed singularly driving trade-led growth. Policymakers must prioritize relaxing policies and funneling resources effectively toward fostering financial sector growth and counteract potential negative impacts on economic development.

Analyzing the Relationship between Natural Resources Rents and Nepal's Gross Domestic Product

Dil Nath Dangal — 2021-12-31

The objective of this study is to analyze the relationship between natural resources rents and Gross Domestic Product (GDP), using the descriptive research design. The study collected quantitative data from the World Bank, covering the period from 1970 to 2020. Upon analyzing the relationship between gross domestic product (GDP) and total natural resources rents to GDP, the study found a statistically significant negative Pearson's correlation of -0.423 and a highly significant negative Spearman's rho correlation of -0.849. These findings indicate that there was a complex relationship between GDP and natural resources rents. The study suggests negative association between GDP and natural resource rents, providing insights into the importance of efficient use of natural resources in promoting sustainable economic growth.

Central Bank's Independence and the Golden Rule in Nepal: A Concept Analysis with Dynamic Inconsistency of Monetary Policy

Aditya Pokhrel — 2021-12-31

This paper attempts to study the concept analysis of the central bank's independence and the golden rule in Nepal in relation with the dynamic inconsistency of monetary policy. In 2007, an optimal inflation-rate was assessed, which suggested that it would be beneficial for Nepal to establish a range for inflation targets centered around the optimal inflation rate identified through analysis which would grant autonomy to the Nepal Rastra Bank (NRB) to ensure price stability. However, concerns have arisen regarding potential political influence on the NRB and fiscal challenges, leading to uncertainties about the country's economic sustainability. The Golden Rule, advocating for balanced budgets, is proposed as a potential solution, but its implementation is complicated by Nepal's unique socio-political context. This research, drawing on economic theories from Kydland, Prescott, Barro, Gordon, and others, delved into the complex relationship between central bank independence, fiscal policy, and consistency in Nepal. The nation's economic path hinges on effectively navigating these complexities to strike a balance between immediate political needs and long-term stability. The concept of dynamic inconsistency underscores the risks associated with prioritizing short-term gains, emphasizing the necessity for strategic decision-making in economic governance. Ultimately, Nepal confronts the challenge of aligning its economic policies to ensure resilience against short-term pressures while promoting enduring long-term stability.

Fostering Livelihoods: Exploring the Scope and Challenges of Non-Timber Forest Products in Magar Community

Khila Nath Sapkota — 2021-12-31

The paper aims to investigate the management practices and income-generating potential of non-timber forest products (NTFPs) in promoting the livelihoods of the Magar community in Janjang Village, Sindhuli. The Magar community, a marginalized indigenous nationality in Nepal, relies on NTFPs harvested from nearby forests. The study evaluates the commercial significance of NTFPs and the involvement of Magars in their trade, particularly with India. Through an empirical approach, the research involved unstructured interviews with fifteen local households to gather information. Findings indicate that while the collection and trade of NTFPs may not be a lucrative income source for individuals with higher landholdings, food security, and alternative income streams, it holds significant importance for Magars lacking access to land and alternative sources of income. It is a very nominal price offered for the NTFPs collected by the Magar community which does not even cover the labor costs (Piya et al., 2013). In response to the identified challenges, the community has recognized the need for collective action and established the Magar Community Support Cooperative Limited (MSCL) to facilitate and enhance NTFP trading. The cooperative has implemented institutionalized practices to streamline the processes involved in the collection, management, marketing, and trading of non-timber forest products (NTFPs). This cooperative structure aims to improve the overall efficiency and effectiveness of NTFP-related activities, fostering sustainable livelihoods for the Magar community in the Janjang Village of Sindhuli.

Contribution of Skill and Knowledge of Return Migrant Workers in Economic Productive Sectors

Kamal Kumar Yakha — 2021-12-31

This study focuses on contribution of skill and knowledge of return migrant workers in economic productive sectors. It examined of acquired learn skills and knowledge are transferred by migrant workers from origin and the destination country. In the study areas, the purposive sampling method was used. However, census method, was used only the purpose of selecting are identifying household survey in the study area. It includes those migrants who have migrated to foreign employment at least stay 6 months for work for the last 5 years. However, from the total selected households were taken total 275 of the migrant respondents. Primary and secondary data were used in this study. In this study, both descriptive and analytical analysis approach were used. Similarly, qualitative information and quantitative data were used for this study purpose. Pilot survey was also conducted for purpose of selection of household. The study indicated that the majority of respondents were concluded to establish in agriculture / livestock. Similarly, higher volumes of migrant workers found in less than 2 lakha investment of remittances to established in enterprise. In large number of respondents haired two and three or more workers only part time work purpose. However, most of enterprises involved one worker regularly. In large numbers of respondents earn income higher less than twenty thousand per month in enterprise business. Majority of migrants purchased their earning income money on basic needs and to pay loans. Furthermore, most of respondents changed to improve in livelihood for basic needs of household family/ community. So, the research can be conducted skills and knowledge transformation on productive works for economic contribution purpose.

Assessment of Different Irrigation Systems and Agricultural Productivity in Nawalparasi (West) District

Bhola Nath Dhakal — 2021-12-31

Agriculture is the mainstay of people living in Nepal. The perception of agricultural yield has been broadly used to clarify the distributional organization and outline of agriculture. Irrigation is the practice of supplying water to the crops unnaturally to fulfill the water necessities. This study attempts to assess the different irrigation systems (surface irrigation, canal irrigation and ground water supply irrigation) practiced in Nawalparasi (west) district and their relation on agricultural productivity. Household survey with structural questionnaires, Key Informant Interview (KII)including field observation and marking on cadastral map has been used as primary sources of data and furthermore review of publications i.e., district profile, national agricultural census report, annual reports of district agriculture development office and research articles have been used as secondary sources of data. The result showed that the average productivity of different crops has affected by the reliability of sources of irrigation systems in all study sites. Further, diverse cropping patterns and cropping intensity were observed in different irrigation systems that ranging from 141 to 226.

Factors Affecting Employment Opportunities to Manufacturing Sector of Nepal

Bashu Dev Dhungel — 2021-12-31

Nepalese manufacturing sector is not properly developed. However, manufacturing sector provides wide employment opportunities to people. Therefore, the main purpose of this study is to investigate the factors affecting employment opportunities in Nepalese manufacturing sector. This paper has employed two stage least square (2SLS) method using the time series macroeconomic data. The 2SLS method has been used to avoid the simultaneous equation bias. Manufacturing employment is explained variable and real foreign direct investment, manufacturing gross domestic product, NEPSE index and government expenditure in manufacturing sector are considered as explanatory variables. The 2SLS results have confirmed that foreign direct investment flows, capital market development, government expenditure and real GDP are positive and significant factors which contribute to expand the employment opportunities in manufacturing sector of Nepal. Therefore, Government of Nepal rise the expenditure in manufacturing sector as well as others infrastructure development to increase the flows of foreign capital in manufacturing sector to generate the employment opportunities. Furthermore, government of Nepal focus to develop financial markets for capital creation which leads economic growth as well as employment opportunities.