Relationship between Macroeconomic Policy and Long-Run Economic Growth of Nepal
DOI:
https://doi.org/10.3126/qjmss.v3i2.41584Keywords:
Cointegration, Autoregressive Distributed Lag (ARDL), Vector Error Correction (VEC)Abstract
Background: The paper is an attempt to find the long-run relationship between macroeconomic variables and economic growth in Nepal. The variables in the study are run across the Cobb-Douglas production model.
Objective: This paper examines the relationship between Gross Fixed Capital Formation, Population, Trade openness, Money Supply and GDP growth economic growth in Nepal.
Method: The ARDL bound test and Error Correction model incorporated in the study to examine the long-run relationship among macroeconomic variables.
Conclusion: Based on the Bound Test of F-statistics the Cointegration Result exists among the variable and ARDL (1,1,1,1,1) relation is estimated.
Implications: Since the study has found the existence of a cointegration relationship on the variables of the study and the long-term relationship among economic growth is significant with GFCF. The policy should be targeted at investment growth in Nepal.
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