Pub Date : 2018-11-01DOI: 10.3126/nrber.v30i2.52286
Kishor Hakuduwal
The paper estimates and assesses the technical efficiency at individual and aggregate levels and categorizes groups of banks at various ranges of efficiency. The commercial and development banks established before 2005 in Nepal has been considered as the population of the study and 20 banks are selected using systematic random sampling. The 180 observations of nine year’s panel data from FY 2006/07 to FY 2014/15 has been used. Stochastic Frontier Approach is used taking three input variables i.e. capital, deposit and human resource cost, and one output variable i.e. loans and advance of sampled banks for analysis. The study found that the average technical efficiency (TE) by nature of banks provide commercial banks as the more efficient than development banks. The joint venture banks are the most efficient than other categories of banks. The average efficiency of banks established inside the Kathmandu valley (Head Office located inside Kathmandu) is lower than the average efficiency of banks established outside the Kathmandu valley (Head Office located outside Kathmandu). Similarly, the banks established after 1995 are found more efficient than the banks established before 1995. The study has important implications for the policymakers to take corrective actions for improving the efficiency of the Nepalese banking sector with respect to human resource policy, deposit collection policy and loan management policy.
{"title":"Technical Efficiency of Nepalese Banking Sector","authors":"Kishor Hakuduwal","doi":"10.3126/nrber.v30i2.52286","DOIUrl":"https://doi.org/10.3126/nrber.v30i2.52286","url":null,"abstract":"The paper estimates and assesses the technical efficiency at individual and aggregate levels and categorizes groups of banks at various ranges of efficiency. The commercial and development banks established before 2005 in Nepal has been considered as the population of the study and 20 banks are selected using systematic random sampling. The 180 observations of nine year’s panel data from FY 2006/07 to FY 2014/15 has been used. Stochastic Frontier Approach is used taking three input variables i.e. capital, deposit and human resource cost, and one output variable i.e. loans and advance of sampled banks for analysis. The study found that the average technical efficiency (TE) by nature of banks provide commercial banks as the more efficient than development banks. The joint venture banks are the most efficient than other categories of banks. The average efficiency of banks established inside the Kathmandu valley (Head Office located inside Kathmandu) is lower than the average efficiency of banks established outside the Kathmandu valley (Head Office located outside Kathmandu). Similarly, the banks established after 1995 are found more efficient than the banks established before 1995. The study has important implications for the policymakers to take corrective actions for improving the efficiency of the Nepalese banking sector with respect to human resource policy, deposit collection policy and loan management policy.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"308 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123605611","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-11-01DOI: 10.3126/nrber.v30i2.52277
K. Dhungel
From the couple of decades remittances have been playing an important role in the Nepalese economy. For people of rural areas even for the urban households, remittance is becoming the major source of livelihood. Therefore, this study considers remittance as a focus variable with an aim to assess the link between remittance and growth. Autoregressive distributed lag (ARDL) model is applied to examine the relationship between remittance and growth. All the variables included in the analysis became stationary after first difference. The result of bound test confirms that the variables are cointegrated. It means the variables have long run relationship. The empirical result reveals that one percent increase in remittance increases the GDP by 0.36 percent in the long run. Similarly, the gross fixed capital formation, secondary school enrolment and the trade openness and per capita GDP have positive relationship. It implies that one percent increase in capital, labor and trade openness increases the per capita GDP by 0.82 percent, 0.46 percent and 0.30 percent in the long run respectively.
{"title":"The Link between Remittance and Economic Growth: An ARDL Bound Testing Approach","authors":"K. Dhungel","doi":"10.3126/nrber.v30i2.52277","DOIUrl":"https://doi.org/10.3126/nrber.v30i2.52277","url":null,"abstract":"From the couple of decades remittances have been playing an important role in the Nepalese economy. For people of rural areas even for the urban households, remittance is becoming the major source of livelihood. Therefore, this study considers remittance as a focus variable with an aim to assess the link between remittance and growth. Autoregressive distributed lag (ARDL) model is applied to examine the relationship between remittance and growth. All the variables included in the analysis became stationary after first difference. The result of bound test confirms that the variables are cointegrated. It means the variables have long run relationship. The empirical result reveals that one percent increase in remittance increases the GDP by 0.36 percent in the long run. Similarly, the gross fixed capital formation, secondary school enrolment and the trade openness and per capita GDP have positive relationship. It implies that one percent increase in capital, labor and trade openness increases the per capita GDP by 0.82 percent, 0.46 percent and 0.30 percent in the long run respectively.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129937709","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-05-11DOI: 10.3126/nrber.v30i1.52296
Nepal Rastra Bank Research Department
This paper presents a brief survey of macroeconomic models of Nepal. It also empirically investigates sectoral models of macroeconomic variables including inflation, monetary aggregate, fiscal and external sector upon which policymakers' concern rests during the process of monetary policy formulation. Sample period of 1975 to 2016 is used for the estimation. The Data Generating Process (DGP) identified in this paper for the variables of interest meets necessary criteria both from theory and empirical ground. These models are useful to understand general relationship from sectoral perspective and to carryout simple forecasting for making monetary and other macroeconomic policy decisions.
{"title":"Macro Modeling Practices at Nepal Rastra Bank","authors":"Nepal Rastra Bank Research Department","doi":"10.3126/nrber.v30i1.52296","DOIUrl":"https://doi.org/10.3126/nrber.v30i1.52296","url":null,"abstract":"This paper presents a brief survey of macroeconomic models of Nepal. It also empirically investigates sectoral models of macroeconomic variables including inflation, monetary aggregate, fiscal and external sector upon which policymakers' concern rests during the process of monetary policy formulation. Sample period of 1975 to 2016 is used for the estimation. The Data Generating Process (DGP) identified in this paper for the variables of interest meets necessary criteria both from theory and empirical ground. These models are useful to understand general relationship from sectoral perspective and to carryout simple forecasting for making monetary and other macroeconomic policy decisions.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125244105","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-05-11DOI: 10.3126/nrber.v30i1.52300
A. Wagle
The most overarching and universally accepted imperative to federalize any unitary nation-state is to reduce, both vertical and horizontal, fiscal imbalances as ensured availability of financial resources only could augment any form of well-being and prosperity. Such imbalances constrict all desirable economic outcomes. But, while carving seven States out of the erstwhile unitary state, any other priority like identity or territoriality may have prevailed but fiscal imbalance. This study shows that mainly vertical fiscal imbalance still alarmingly persists even after federalization of the country. The Panel Corrected Standard Error (PCSE) model examines how these imbalances between the federation and the sub-national units (vertical) and, also among the States themselves(horizontal) are likely to impact on the fiscal federalism framework and its functionality. It contends that highly skewed distribution and mobilization of financial resources essentially defeats the very rationale of federalizing Nepal and, much debated identity consideration in federalism has no positive welfare implication.
{"title":"Fiscal Imbalances in Nepal's Federalism : An Empirical Analysis","authors":"A. Wagle","doi":"10.3126/nrber.v30i1.52300","DOIUrl":"https://doi.org/10.3126/nrber.v30i1.52300","url":null,"abstract":"The most overarching and universally accepted imperative to federalize any unitary nation-state is to reduce, both vertical and horizontal, fiscal imbalances as ensured availability of financial resources only could augment any form of well-being and prosperity. Such imbalances constrict all desirable economic outcomes. But, while carving seven States out of the erstwhile unitary state, any other priority like identity or territoriality may have prevailed but fiscal imbalance. This study shows that mainly vertical fiscal imbalance still alarmingly persists even after federalization of the country. The Panel Corrected Standard Error (PCSE) model examines how these imbalances between the federation and the sub-national units (vertical) and, also among the States themselves(horizontal) are likely to impact on the fiscal federalism framework and its functionality. It contends that highly skewed distribution and mobilization of financial resources essentially defeats the very rationale of federalizing Nepal and, much debated identity consideration in federalism has no positive welfare implication.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"43 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126139899","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-05-11DOI: 10.3126/nrber.v30i1.52297
M. Shrestha, G. Bhatta
Information on the pattern of money-price relationship is crucial for formulating appropriate monetary policy and implementing it effectively. This paper re-examines the money-price relationship in Nepal following a new methodological framework for time series data analysis. Test results show that money supply significantly affects domestic price in Nepal. Indian inflation is the major factor that has largest impact on the price situation in Nepal. However, exchange rate is not found to be associated with the changes in price level in Nepal. Test results also show that money-price relationship in Nepal has become much stronger in the recent times in terms of the magnitude of impact.
{"title":"Revisiting Money-Price Relationship in Nepal Following a New Methodological Framework","authors":"M. Shrestha, G. Bhatta","doi":"10.3126/nrber.v30i1.52297","DOIUrl":"https://doi.org/10.3126/nrber.v30i1.52297","url":null,"abstract":"Information on the pattern of money-price relationship is crucial for formulating appropriate monetary policy and implementing it effectively. This paper re-examines the money-price relationship in Nepal following a new methodological framework for time series data analysis. Test results show that money supply significantly affects domestic price in Nepal. Indian inflation is the major factor that has largest impact on the price situation in Nepal. However, exchange rate is not found to be associated with the changes in price level in Nepal. Test results also show that money-price relationship in Nepal has become much stronger in the recent times in terms of the magnitude of impact.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116185337","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-05-11DOI: 10.3126/nrber.v30i1.52299
Deepak Adhikari
The objective of the study is to examine the impact of exchange rate on trade deficit and foreign exchange reserve in Nepal. The hypotheses of the study are: (a) there is no significant positive association between nominal exchange rate and foreign exchange reserve and (b) there is no significant relationship between nominal exchange rate of Nepalese rupee with US dollar and trade deficit. As empirical analysis shows that one percentage point depreciation of the Nepalese rupee (NPR) with respect to US dollar results in an (a) increase in reserve by 0.82 percentage points and (b) decline in trade deficit by 0.75 percentage points, the null hypotheses are rejected, thus suggesting that maintaining NPR undervalued with US dollar can improve trade deficit and increase foreign exchange reserves. However, because of pegging with Indian currency, NPR sometimes appreciates in line with Indian currency. This situation could be counterproductive for improving trade deficit and increasing foreign exchange reserve of Nepal. In conclusion, considering the external sector stability as one of the major policy objectives, exchange rate policy can be fine-tuned to correct the trade deficit and maintain adequate foreign exchange reserve to sustain imports and service external debt.
{"title":"Impact of Exchange Rate on Trade Deficit and Foreign Exchange Reserve in Nepal: An Empirical Analysis","authors":"Deepak Adhikari","doi":"10.3126/nrber.v30i1.52299","DOIUrl":"https://doi.org/10.3126/nrber.v30i1.52299","url":null,"abstract":"The objective of the study is to examine the impact of exchange rate on trade deficit and foreign exchange reserve in Nepal. The hypotheses of the study are: (a) there is no significant positive association between nominal exchange rate and foreign exchange reserve and (b) there is no significant relationship between nominal exchange rate of Nepalese rupee with US dollar and trade deficit. As empirical analysis shows that one percentage point depreciation of the Nepalese rupee (NPR) with respect to US dollar results in an (a) increase in reserve by 0.82 percentage points and (b) decline in trade deficit by 0.75 percentage points, the null hypotheses are rejected, thus suggesting that maintaining NPR undervalued with US dollar can improve trade deficit and increase foreign exchange reserves. However, because of pegging with Indian currency, NPR sometimes appreciates in line with Indian currency. This situation could be counterproductive for improving trade deficit and increasing foreign exchange reserve of Nepal. In conclusion, considering the external sector stability as one of the major policy objectives, exchange rate policy can be fine-tuned to correct the trade deficit and maintain adequate foreign exchange reserve to sustain imports and service external debt.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"288 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116585251","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-05-11DOI: 10.3126/nrber.v30i1.52301
Jyoti Regmi Adhikary
While a wealth of research has examined how work family conflict (WFC) affects negative work outcomes, there is limited research investigating the relationship of WFC with positive work outcomes. Using a sample of 381 Nepali banking professionals, this study examined the relationships of WFC with career satisfaction and social support. Study also explored how the socio demographic variables affected WFC, career satisfaction, and social support. Analyses indicated no statistically significant relationships of WFC with career satisfaction. Results also indicated association of social support from both work and family with increased career satisfaction. However, social support did not emerge as a significant moderator in the relationship between WFC and career satisfaction. In case of socio-demographic variables, only organizational grouping stood out as significant difference in the level of WFC experience among banking employees. This study has various theoretical and practical implications that are presented along with further research issues.
{"title":"Work Family Conflict and Career Satisfaction in Banking Sector of Nepal","authors":"Jyoti Regmi Adhikary","doi":"10.3126/nrber.v30i1.52301","DOIUrl":"https://doi.org/10.3126/nrber.v30i1.52301","url":null,"abstract":"While a wealth of research has examined how work family conflict (WFC) affects negative work outcomes, there is limited research investigating the relationship of WFC with positive work outcomes. Using a sample of 381 Nepali banking professionals, this study examined the relationships of WFC with career satisfaction and social support. Study also explored how the socio demographic variables affected WFC, career satisfaction, and social support. Analyses indicated no statistically significant relationships of WFC with career satisfaction. Results also indicated association of social support from both work and family with increased career satisfaction. However, social support did not emerge as a significant moderator in the relationship between WFC and career satisfaction. In case of socio-demographic variables, only organizational grouping stood out as significant difference in the level of WFC experience among banking employees. This study has various theoretical and practical implications that are presented along with further research issues.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130276190","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2017-10-11DOI: 10.3126/nrber.v29i2.52510
Rojan Baniya, S. Adhikari
A prudent analysis of the factors affecting turnover intention of the employees after mergers and acquisitions should guide the managers to prevent the fallout of employees during such complex process; the primary objective of this study is to identify those factors that influence turnover intention of the employees. Drawing from the previous studies, a conceptual framework was developed that took into account pre-merger organizational identification, procedural justice, utility with the merger, non-monetary benefits, monetary benefits, trust with merger and adequate authority delegation as variables that influence post-merger organizational identification and satisfaction with the merger. The results illustrate that pre-merger organization identification, utility with the merger, and trust with merger significantly predicted the post-merger organization identification, whereas only trust with merger significantly predicted the satisfaction with the merger. Furthermore, the study elucidates that the post-merger organizational identification could prevent the turnover intention among the employees. The findings of the study unravel sentiments of the employees during the consolidation process and provide the practitioners and the policy-makers with a base to develop an effective strategy to prevent turnover of employees during the mergers and acquisitions.
{"title":"Mergers and Acquisitions of the Financial Institutions: Factors Affecting the Employee Turnover Intention","authors":"Rojan Baniya, S. Adhikari","doi":"10.3126/nrber.v29i2.52510","DOIUrl":"https://doi.org/10.3126/nrber.v29i2.52510","url":null,"abstract":"A prudent analysis of the factors affecting turnover intention of the employees after mergers and acquisitions should guide the managers to prevent the fallout of employees during such complex process; the primary objective of this study is to identify those factors that influence turnover intention of the employees. Drawing from the previous studies, a conceptual framework was developed that took into account pre-merger organizational identification, procedural justice, utility with the merger, non-monetary benefits, monetary benefits, trust with merger and adequate authority delegation as variables that influence post-merger organizational identification and satisfaction with the merger. The results illustrate that pre-merger organization identification, utility with the merger, and trust with merger significantly predicted the post-merger organization identification, whereas only trust with merger significantly predicted the satisfaction with the merger. Furthermore, the study elucidates that the post-merger organizational identification could prevent the turnover intention among the employees. The findings of the study unravel sentiments of the employees during the consolidation process and provide the practitioners and the policy-makers with a base to develop an effective strategy to prevent turnover of employees during the mergers and acquisitions.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"106 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128151287","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2017-10-11DOI: 10.3126/nrber.v29i2.52417
Pradeep Raj Poudyal, B. Budha, Sajana Silpakar, Siddha Raj Bhatta, N. Thapa
Estimation of potential output and output gap is one of the key issues for the conduct of macroeconomic policies and structural reforms in the long-run as the idea of output gap helps decide on the stance of such policies. A positive output gap, for instance, indicates that aggregate demand exceeds the productive capacity of the economy resulting into inflationary pressure. In contrast, a negative output gap is associated with recession, spare capacity, disinflation, and unemployment rate above the non-accelerating inflation rate of unemployment. In case of Nepal, the potential output grew by 4.3 percent during 1976-2017. While potential output growth was above 4.5 percent during the 1980s and 1990s, fall in total factor productivity limited such growth to 4 percent on average after 2000. The results show that output gaps in Nepalese case are mainly determined by the supply shocks like weather conditions, natural disasters, and supply disruptions rather than fluctuations in aggregate demand.
{"title":"Potential Output and Output Gap Estimates for Nepal","authors":"Pradeep Raj Poudyal, B. Budha, Sajana Silpakar, Siddha Raj Bhatta, N. Thapa","doi":"10.3126/nrber.v29i2.52417","DOIUrl":"https://doi.org/10.3126/nrber.v29i2.52417","url":null,"abstract":"Estimation of potential output and output gap is one of the key issues for the conduct of macroeconomic policies and structural reforms in the long-run as the idea of output gap helps decide on the stance of such policies. A positive output gap, for instance, indicates that aggregate demand exceeds the productive capacity of the economy resulting into inflationary pressure. In contrast, a negative output gap is associated with recession, spare capacity, disinflation, and unemployment rate above the non-accelerating inflation rate of unemployment. In case of Nepal, the potential output grew by 4.3 percent during 1976-2017. While potential output growth was above 4.5 percent during the 1980s and 1990s, fall in total factor productivity limited such growth to 4 percent on average after 2000. The results show that output gaps in Nepalese case are mainly determined by the supply shocks like weather conditions, natural disasters, and supply disruptions rather than fluctuations in aggregate demand.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"06 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130397088","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2017-10-11DOI: 10.3126/nrber.v29i2.52511
Hom Nath Gaire
This study examines cointegration and causality between the NEPSE index vis-à-vis short term interest rates and gold prices in Nepal. Main objective of this study is to identify the long run equilibrium relationship as well as cause and effect relationship between the variables under consideration. Monthly time series data cover the period starting from January 2006 to December 2016, which were sourced from Nepal Stock Exchange (NEPSE), Nepal Rastra Bank (NRB) and Nepal Gold and Silver Dealers Association (NEGOSIDA). The results of the unit root (ADF) tests and Cointegration (Johansen) tests confirm that there is long-run equilibrium relationship between the NEPSE index, short term interest rates and gold prices in Nepal. In the meantime, Granger Causality test reveals that there is no causality between the gold price and NEPSE index. However, it is confirmed that there is unilateral causal relationship between the NEPSE index and short term interest rate which moves from interest rate to NEPSE index. From the test results it can be concluded that the short-term interest rates are the better predictor for NEPSE index and bullion (commodity) market is yet to be developed as substitute of the Stock Market.
{"title":"Stock Index, Interest Rate and Gold Price of Nepal: Cointegration and Causality Analysis","authors":"Hom Nath Gaire","doi":"10.3126/nrber.v29i2.52511","DOIUrl":"https://doi.org/10.3126/nrber.v29i2.52511","url":null,"abstract":"This study examines cointegration and causality between the NEPSE index vis-à-vis short term interest rates and gold prices in Nepal. Main objective of this study is to identify the long run equilibrium relationship as well as cause and effect relationship between the variables under consideration. Monthly time series data cover the period starting from January 2006 to December 2016, which were sourced from Nepal Stock Exchange (NEPSE), Nepal Rastra Bank (NRB) and Nepal Gold and Silver Dealers Association (NEGOSIDA). The results of the unit root (ADF) tests and Cointegration (Johansen) tests confirm that there is long-run equilibrium relationship between the NEPSE index, short term interest rates and gold prices in Nepal. In the meantime, Granger Causality test reveals that there is no causality between the gold price and NEPSE index. However, it is confirmed that there is unilateral causal relationship between the NEPSE index and short term interest rate which moves from interest rate to NEPSE index. From the test results it can be concluded that the short-term interest rates are the better predictor for NEPSE index and bullion (commodity) market is yet to be developed as substitute of the Stock Market.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"721 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116995511","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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