Inflation and Economic Growth Paradox: A Co-integration Analysis in Nepal

Authors

  • Uttam Lal Joshi Makawanpur Multiple Campus, Hetauda, Makawanpur, Nepal

DOI:

https://doi.org/10.3126/irjmmc.v2i3.40055

Keywords:

Bounds Test, Broad Money Supply, Cointegration, GDP growth, Inflation

Abstract

The empirical study investigates the relationship between economic growth, inflation and broad money supply in Nepal. Data since 1965 to 2020 are taken from World Bank and Autoregressive Distributive Lag Model is used to find cointegration between the variables to show long run and short run dynamics. Augmented Dickey- Fuller and Philips- Perron tests are conducted to find the unit roots in the model. Result shows the error correction term is negative (-0.75) and significant (0.0043) where bounds test supports the long run cointegration and error correction model suggest the speed of adjustment. The estimated regression equation is found robust and stable (serial correlation and heteroskedacity tests).  The research shows inflation has short run and long run impact on economic growth so inflation should be kept within its threshold level from sound monetary and fiscal policy mechanism.

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Author Biography

Uttam Lal Joshi, Makawanpur Multiple Campus, Hetauda, Makawanpur, Nepal

M.Phil. Scholar, Nepal Open University, Kathmandu
Lecturer, Economics, Makawanpur Multiple Campus, Hetauda

 

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Published

2021-10-03

How to Cite

Joshi, U. L. (2021). Inflation and Economic Growth Paradox: A Co-integration Analysis in Nepal . International Research Journal of MMC, 2(3), 1–12. https://doi.org/10.3126/irjmmc.v2i3.40055

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Section

Articles