Pub Date : 2015-05-24DOI: 10.3126/nrber.v27i1.52567
B. Thapa, S. Nepal
This study surveys 436 college students to examine their financial literacy; the impact of demographic, educational and personality characteristics on financial literacy. Mean, ANOVA and logistic regression were used in carrying out analysis. Results show that most of the students have basic level of financial knowledge but they lack in understanding of credit, taxes, share market, financial statement and insurance. Students are highly influenced by their parents at home and they have positive attitude towards savings. The study further identified income, age, stream of education, types of college, and attitude of students as determinants of financial knowledge; and financial knowledge is unaffected by gender, university affiliation, financial behavior and influence. It is concluded that college students have basic level of financial knowledge. However, overall financial knowledge of the students is affected by some of their demographic, educational and personality characteristics.
{"title":"Financial Literacy in Nepal: A Survey Analysis from College Students","authors":"B. Thapa, S. Nepal","doi":"10.3126/nrber.v27i1.52567","DOIUrl":"https://doi.org/10.3126/nrber.v27i1.52567","url":null,"abstract":"This study surveys 436 college students to examine their financial literacy; the impact of demographic, educational and personality characteristics on financial literacy. Mean, ANOVA and logistic regression were used in carrying out analysis. Results show that most of the students have basic level of financial knowledge but they lack in understanding of credit, taxes, share market, financial statement and insurance. Students are highly influenced by their parents at home and they have positive attitude towards savings. The study further identified income, age, stream of education, types of college, and attitude of students as determinants of financial knowledge; and financial knowledge is unaffected by gender, university affiliation, financial behavior and influence. It is concluded that college students have basic level of financial knowledge. However, overall financial knowledge of the students is affected by some of their demographic, educational and personality characteristics.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"51 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-05-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128700997","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 : 2015-05-24DOI: 10.3126/nrber.v27i1.52564
B. P. Gautam
Economic growth and financial development are closely related. The interaction between them is crucial and has attracted great attention of researchers. This study attempts to examine the relationship between economic growth and financial development in Nepal between 1975 and 2012. The paper has used Augmented Dickey-Fuller and Philips-Perron tests to test for the existence of unit root, Co-integration test to examine long run relationship and Granger Causality test to find out causal relationship. In addition, vector error correction method has been applied to find out the speed of adjustment and the dynamics of relationship. The empirical evidence confirms that the financial development causes economic growth. In fact, financial development is the cause for economic growth in terms of short-term dynamics, while economic growth sustains financial development in the long-run. Based on the empirical findings, this study recommends that it is necessary to launch the reform programs in the financial system to consolidate and improve the efficiency and effectiveness of the financial system as well as to cope with the emerging changes. Thus, it asks for the consolidation of the system not only for the positive reinforcement between economic growth and financial development but also for the post crisis resilience and sustainability.
{"title":"Role of Financial Development in Economic Growth of Nepal: An Empirical Analysis","authors":"B. P. Gautam","doi":"10.3126/nrber.v27i1.52564","DOIUrl":"https://doi.org/10.3126/nrber.v27i1.52564","url":null,"abstract":"Economic growth and financial development are closely related. The interaction between them is crucial and has attracted great attention of researchers. This study attempts to examine the relationship between economic growth and financial development in Nepal between 1975 and 2012. The paper has used Augmented Dickey-Fuller and Philips-Perron tests to test for the existence of unit root, Co-integration test to examine long run relationship and Granger Causality test to find out causal relationship. In addition, vector error correction method has been applied to find out the speed of adjustment and the dynamics of relationship. The empirical evidence confirms that the financial development causes economic growth. In fact, financial development is the cause for economic growth in terms of short-term dynamics, while economic growth sustains financial development in the long-run. Based on the empirical findings, this study recommends that it is necessary to launch the reform programs in the financial system to consolidate and improve the efficiency and effectiveness of the financial system as well as to cope with the emerging changes. Thus, it asks for the consolidation of the system not only for the positive reinforcement between economic growth and financial development but also for the post crisis resilience and sustainability.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-05-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131234844","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 : 2015-05-24DOI: 10.3126/nrber.v27i1.52568
Nimesh Salike, Benli Lu
This paper examines the comparative advantage of a selection of 27 Nepal’s export products, of which 16 are extracted from the Nepal Trade Integration Strategy (NTIS 2010) list of potential priority exports. The primary purpose of this study is to investigate if these priority export products are in alignment with the concept of comparative advantage. Balassa’s revealed comparative advantage (RCA) index is used as the methodology for analysis while the data used spans from 2000 to 2011. Empirical results show that out of the 16 NTIS 2010 potential priority exports, only 10 are products which Nepal has comparative advantage in producing, major ones being pashmina, wool and agro food products. The findings also reveal that there are at least three other products- carpets, textile and juice that Nepal poses high RCA indices but are not included under NTIS 2010 priority list.
{"title":"An Examination of Nepal’s Export Choice based on Revealed Comparative Advantage","authors":"Nimesh Salike, Benli Lu","doi":"10.3126/nrber.v27i1.52568","DOIUrl":"https://doi.org/10.3126/nrber.v27i1.52568","url":null,"abstract":"This paper examines the comparative advantage of a selection of 27 Nepal’s export products, of which 16 are extracted from the Nepal Trade Integration Strategy (NTIS 2010) list of potential priority exports. The primary purpose of this study is to investigate if these priority export products are in alignment with the concept of comparative advantage. Balassa’s revealed comparative advantage (RCA) index is used as the methodology for analysis while the data used spans from 2000 to 2011. Empirical results show that out of the 16 NTIS 2010 potential priority exports, only 10 are products which Nepal has comparative advantage in producing, major ones being pashmina, wool and agro food products. The findings also reveal that there are at least three other products- carpets, textile and juice that Nepal poses high RCA indices but are not included under NTIS 2010 priority list.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-05-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125141156","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 : 2015-04-01DOI: 10.3126/nrber.v27i1.52565
M. K. Chaulagai
This paper attempts to explore the J-curve phenomenon in the case of Nepalese foreign trade sector in order to examine whether devaluation2 of Nepalese currency can be taken as a policy tool for improving Nepalese trade imbalance with the rest of the world economies. Johansen's cointegration test, vector autoregression (VAR) model, impulse response function as well as autoregressive distributed lag (ARDL) bounds testing cointegration approach has been employed in order to see the relationships between the nominal effective exchange rate index (NEER) and trade balance (TB) as well as the real effective exchange rate index (REER) and trade balance (TB) of Nepal. The study found no evidence of "J-curve" in the case of Nepalese trade. On the contrary to the "J-curve" phenomenon as explained by the classical text books, the findings of the study suggest that depreciation of Nepalese exchange rate rather produces a flatter "L-curve" phenomenon indicating that there is no room for improving Nepalese trade imbalance through a currency devaluation process.
{"title":"Testing the J-Curve Hypothesis: A Case of Nepal","authors":"M. K. Chaulagai","doi":"10.3126/nrber.v27i1.52565","DOIUrl":"https://doi.org/10.3126/nrber.v27i1.52565","url":null,"abstract":"This paper attempts to explore the J-curve phenomenon in the case of Nepalese foreign trade sector in order to examine whether devaluation2 of Nepalese currency can be taken as a policy tool for improving Nepalese trade imbalance with the rest of the world economies. Johansen's cointegration test, vector autoregression (VAR) model, impulse response function as well as autoregressive distributed lag (ARDL) bounds testing cointegration approach has been employed in order to see the relationships between the nominal effective exchange rate index (NEER) and trade balance (TB) as well as the real effective exchange rate index (REER) and trade balance (TB) of Nepal. The study found no evidence of \"J-curve\" in the case of Nepalese trade. On the contrary to the \"J-curve\" phenomenon as explained by the classical text books, the findings of the study suggest that depreciation of Nepalese exchange rate rather produces a flatter \"L-curve\" phenomenon indicating that there is no room for improving Nepalese trade imbalance through a currency devaluation process.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"46 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116963620","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 : 2015-04-01DOI: 10.3126/nrber.v27i1.52566
T. Koirala
This paper examines discretionary fiscal policy response to the business cycle of Nepal using annual time series ranging from 1975 to 2013. The Cyclically Adjusted Balance (CAB) of overall budget balance is utilized as a measure of discretionary fiscal actions and the output gap a measures of business cycles. Graphical depiction of the CAB accompanied with the output gap shows that the government of Nepal has been pursuing counter-cyclical fiscal policy in the post liberalization period and pro-cyclical in the pre-liberalization period. In line with the recent empirical finding that only counter-cyclical fiscal policy is capable in performing stabilization function, this paper found that the fiscal stimulus of the government of Nepal has also been adding aggregate demand during downturns (bad time) and withdrawing demand during upturns (good time) as envisaged by counter-cyclical discretionary fiscal policy. The counter-cyclicality as such is strong during 2000s whereas there is mild pro-cyclicality during the period 2011-13. For computing CAB, this paper assumes unitary elasticity of revenue with respect to output gap and zero expenditure elasticity with respect to output gap. The output gap has been estimated based on the trend component of the GDP using Kalman filter method. Factors like stronger institutions and sound macroeconomic policies might overcome recent pro-cyclicality of Nepal and allows room for counter-cyclical fiscal policy in the future. Similarly, the phenomenon of high fluctuations in the fiscal impulse over time indicates uncertain and inconsistent fiscal stance of the government. It demands for focus more on automatic stabilizers rather than more discretionary fiscal actions by broadening tax bases and social safety nets.
{"title":"Cyclicality in the Fiscal Policy of Nepal","authors":"T. Koirala","doi":"10.3126/nrber.v27i1.52566","DOIUrl":"https://doi.org/10.3126/nrber.v27i1.52566","url":null,"abstract":"This paper examines discretionary fiscal policy response to the business cycle of Nepal using annual time series ranging from 1975 to 2013. The Cyclically Adjusted Balance (CAB) of overall budget balance is utilized as a measure of discretionary fiscal actions and the output gap a measures of business cycles. Graphical depiction of the CAB accompanied with the output gap shows that the government of Nepal has been pursuing counter-cyclical fiscal policy in the post liberalization period and pro-cyclical in the pre-liberalization period. In line with the recent empirical finding that only counter-cyclical fiscal policy is capable in performing stabilization function, this paper found that the fiscal stimulus of the government of Nepal has also been adding aggregate demand during downturns (bad time) and withdrawing demand during upturns (good time) as envisaged by counter-cyclical discretionary fiscal policy. The counter-cyclicality as such is strong during 2000s whereas there is mild pro-cyclicality during the period 2011-13. For computing CAB, this paper assumes unitary elasticity of revenue with respect to output gap and zero expenditure elasticity with respect to output gap. The output gap has been estimated based on the trend component of the GDP using Kalman filter method. Factors like stronger institutions and sound macroeconomic policies might overcome recent pro-cyclicality of Nepal and allows room for counter-cyclical fiscal policy in the future. Similarly, the phenomenon of high fluctuations in the fiscal impulse over time indicates uncertain and inconsistent fiscal stance of the government. It demands for focus more on automatic stabilizers rather than more discretionary fiscal actions by broadening tax bases and social safety nets.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126561335","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 : 2014-10-08DOI: 10.3126/nrber.v26i2.52584
Hom Nath Gaire
In this paper, the relevance of Keynesian postulates has been examined in the Nepalese context for the period 1975-2012 using annual time series data. The empirical results from the Johansen co-integration tests clearly show that there is long run equilibrium relationship between government expenditure and real GDP, private consumption and gross fixed capital formation. Likewise, Granger Causality test confirms that there is bilateral causal relationship between government expenditure and gross fixed capital formation in Nepal. However, no causal relationship is observed between government expenditure and real GDP and private consumption. Thus, it is confirmed by this study that the Keynesian postulates are relevant for capital formation rather than for increasing real GDP growth and private consumption in Nepal.
{"title":"Relevance of Keynesianism in Nepal: An Empirical Analysis","authors":"Hom Nath Gaire","doi":"10.3126/nrber.v26i2.52584","DOIUrl":"https://doi.org/10.3126/nrber.v26i2.52584","url":null,"abstract":"In this paper, the relevance of Keynesian postulates has been examined in the Nepalese context for the period 1975-2012 using annual time series data. The empirical results from the Johansen co-integration tests clearly show that there is long run equilibrium relationship between government expenditure and real GDP, private consumption and gross fixed capital formation. Likewise, Granger Causality test confirms that there is bilateral causal relationship between government expenditure and gross fixed capital formation in Nepal. However, no causal relationship is observed between government expenditure and real GDP and private consumption. Thus, it is confirmed by this study that the Keynesian postulates are relevant for capital formation rather than for increasing real GDP growth and private consumption in Nepal.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"84 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115703051","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 : 2014-10-08DOI: 10.3126/nrber.v26i2.52583
S. Paudyal
This paper examines short term and long term effects of the macroeconomic variables on the inflation in Nepal during 1975-2011. The variables considered are budget deficits, Indian prices, broad money supply, exchange rate and real GDP. The regression results from Wickens-Breusch Single Equation Error Correction model suggest that all variables considered are significant in long run implying that these variables are the determinants of inflation in Nepal. However, only budget deficit, money supply and Indian prices cause inflation in the short run. The results are consistent with monetarists’ hypothesis of money matters and inflationary gap theory of Keynesian as well as supply constraints approach to inflation.
{"title":"Determinants of Inflation in Nepal: An Empirical Assessment","authors":"S. Paudyal","doi":"10.3126/nrber.v26i2.52583","DOIUrl":"https://doi.org/10.3126/nrber.v26i2.52583","url":null,"abstract":"This paper examines short term and long term effects of the macroeconomic variables on the inflation in Nepal during 1975-2011. The variables considered are budget deficits, Indian prices, broad money supply, exchange rate and real GDP. The regression results from Wickens-Breusch Single Equation Error Correction model suggest that all variables considered are significant in long run implying that these variables are the determinants of inflation in Nepal. However, only budget deficit, money supply and Indian prices cause inflation in the short run. The results are consistent with monetarists’ hypothesis of money matters and inflationary gap theory of Keynesian as well as supply constraints approach to inflation.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"VIII 2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121423831","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 : 2014-10-08DOI: 10.3126/nrber.v26i2.52577
Neelam Timsina
This study examines the impact of commercial bank credit to the private sector on the economic growth in Nepal from supply side perspectives. The study has applied Johansen co-integration approach and Error Correction Model using the time series data for the period of 1975-2014. The empirical results show that bank credit to the private sector has positive effects on the economic growth in Nepal only in the long run. Nevertheless, in the short run, it has been observed a feedback effect from economic growth to private sector credit. More specifically, the growth in real private sector credit by 1 percentage point contributes to an increase in real gross domestic product by 0.40 percentage point in the long run. The empirical results imply that, policy makers should focus on long run policies to promote economic growth – development of modern banking sector, efficient financial market and infrastructure so as to increase the private sector credit which is instrumental to promote growth in the long run.
{"title":"Bank Credit and Economic Growth in Nepal: An Empirical Analysis","authors":"Neelam Timsina","doi":"10.3126/nrber.v26i2.52577","DOIUrl":"https://doi.org/10.3126/nrber.v26i2.52577","url":null,"abstract":"This study examines the impact of commercial bank credit to the private sector on the economic growth in Nepal from supply side perspectives. The study has applied Johansen co-integration approach and Error Correction Model using the time series data for the period of 1975-2014. The empirical results show that bank credit to the private sector has positive effects on the economic growth in Nepal only in the long run. Nevertheless, in the short run, it has been observed a feedback effect from economic growth to private sector credit. More specifically, the growth in real private sector credit by 1 percentage point contributes to an increase in real gross domestic product by 0.40 percentage point in the long run. The empirical results imply that, policy makers should focus on long run policies to promote economic growth – development of modern banking sector, efficient financial market and infrastructure so as to increase the private sector credit which is instrumental to promote growth in the long run.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116254888","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 : 2014-10-08DOI: 10.3126/nrber.v26i2.52581
G. Bhatta
This paper empirically examines Nepalese economic structure by applying OLS technique on the annual series of sectoral growth, population and capital related variables ranging from 1975 – 2012. The estimates obtained with due consideration of stationarity of the series including HP filter revealed that industrial sector is significant to increase per capita income compared to the agriculture and service sectors in Nepal. Moreover, health as indicated by life expectancy and population at working age are found to be substantial to increase the income but, education and capital formation are found insignificant. It is inferred that employment matters for raising per capita income, requiring employment-led growth rather mere growth of economic sub-sectors. Hence, it is needed to have balanced contribution of economic sub-sectors and their employment share to national economy along with healthy workforce to raise the per capita income.
{"title":"Structural Change and Per Capita Income in Nepal: Empirical Evidences","authors":"G. Bhatta","doi":"10.3126/nrber.v26i2.52581","DOIUrl":"https://doi.org/10.3126/nrber.v26i2.52581","url":null,"abstract":"This paper empirically examines Nepalese economic structure by applying OLS technique on the annual series of sectoral growth, population and capital related variables ranging from 1975 – 2012. The estimates obtained with due consideration of stationarity of the series including HP filter revealed that industrial sector is significant to increase per capita income compared to the agriculture and service sectors in Nepal. Moreover, health as indicated by life expectancy and population at working age are found to be substantial to increase the income but, education and capital formation are found insignificant. It is inferred that employment matters for raising per capita income, requiring employment-led growth rather mere growth of economic sub-sectors. Hence, it is needed to have balanced contribution of economic sub-sectors and their employment share to national economy along with healthy workforce to raise the per capita income.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"81 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126002402","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 : 2014-10-08DOI: 10.3126/nrber.v26i2.52578
Prakash Shrestha, Biggyan Raj Subedi
This paper empirically examines the determinants of the stock market performance in Nepal using monthly data for the period of mid-August 2000 to mid-July 2014. The impact of major changes in politics and Nepal Rastra Bank’s policy on lending against share collateral has also been assessed. Empirical results obtained from OLS estimations of behavioural equations reveal that the performance of stock market is found to respond positively to inflation and broad money growth, and negatively to interest rate. This suggests that, in Nepal, share investors seem to take equity as a hedge against inflation and consider stock as an alternative financial instrument. Further, availability of liquidity and the low interest rates stimulate the performance of the Nepalese stock market. More importantly, stock market has been found to respond significantly to changes in political environment and the policy of Nepal Rastra Bank. These findings help to design policies to stabilize or stimulate the share market in Nepal.
{"title":"Determinants of Stock Market Performance in Nepal","authors":"Prakash Shrestha, Biggyan Raj Subedi","doi":"10.3126/nrber.v26i2.52578","DOIUrl":"https://doi.org/10.3126/nrber.v26i2.52578","url":null,"abstract":"This paper empirically examines the determinants of the stock market performance in Nepal using monthly data for the period of mid-August 2000 to mid-July 2014. The impact of major changes in politics and Nepal Rastra Bank’s policy on lending against share collateral has also been assessed. Empirical results obtained from OLS estimations of behavioural equations reveal that the performance of stock market is found to respond positively to inflation and broad money growth, and negatively to interest rate. This suggests that, in Nepal, share investors seem to take equity as a hedge against inflation and consider stock as an alternative financial instrument. Further, availability of liquidity and the low interest rates stimulate the performance of the Nepalese stock market. More importantly, stock market has been found to respond significantly to changes in political environment and the policy of Nepal Rastra Bank. These findings help to design policies to stabilize or stimulate the share market in Nepal.","PeriodicalId":372963,"journal":{"name":"NRB Economic Review","volume":"344 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122645965","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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