Interrelationship between Stock Market and Economy in Nepal

Abstract

This study examines the interrelationship between stock market and economy in Nepal. Economic growth is the dependent variable. The independent variables are monetary policy, interest rate, political stability, gross domestic product and stock market valuation. The primary source of data is used to assess the opinions of the respondents regarding the interrelationship between stock market and economy in Nepal. The study is based on primary data of 114 respondents. To achieve the purpose of the study, structured questionnaire is prepared. The correlation coefficients and regression models are estimated to test the different factors influencing the interrelationship between stock market and economy in Nepal. The result shows that monetary policy is positively correlated to the economic growth. It means that better monetary policy leads to increase in economic growth. Similarly, there is a positive relationship between interest rate and economic growth. It means that increase in interest rate leads to increase in economic growth. Likewise, political stability has a positive relationship with economic growth. It shows that increase in political stability leads to increase in economic growth. Furthermore, there is a positive relationship between stock market evaluation and economic growth. It indicates that increase in stock market evaluation leads to increase in economic growth. Moreover, gross domestic product is positively correlated to the economic growth. It means that increase in gross domestic product leads to increase in economic growth.