Impact of Financial Deepening on Economic Growth in Nepal

Authors

  • Yadav Mani Upadhyaya Assistant Professor of Economics (PhD in Economics) Tribhuvan University, Saraswati Multiple Campus, Kathmandu, Nepal.
  • Khom Raj Kharel Associate Professor of Economics (PhD in Economics), Tribhuvan University, Saraswati Multiple Campus, Kathmandu, Nepal.
  • Omkar Poudel Assistant Professor of Economics, Birendra Multiple Campus, Tribhuvan University, Kathmandu, Nepal.
  • Pradeep Acharya Account Specialist at NOWCFO, MBA, Tribhuvan University, Kathmandu, Nepal.

Keywords:

Broad money (M2), economic growth, financial deepening, granger causality test, private sector credit (PSC), real gross domestic product (RGDP), vector autoregressive (VAR) model

Abstract

Purpose: The objective of this study is to investigate the relationship between financial deepening and economic growth in Nepal.

Design/methodology/approach: The long-term and short-term dynamics among the variables are assessed using econometric techniques. Granger causality tests are applied to determine the direction of causality between private sector credit and economic growth.

Findings: The findings reveal a significant long-term equilibrium relationship among the variables. Both broad money and private sector credit have a positive impact on economic growth in Nepal. The Granger causality tests show bidirectional causality between private sector credit and real gross domestic product.

Conclusions: The results highlight that both broad money and private sector credit contribute significantly to economic expansion.

Implications: The robustness of the model, confirmed through diagnostic tests, underscores the critical role of financial sector policies in sustaining Nepal’s economic growth.

JEL Classification: O16, O43, E44, F43, O53

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Published

2024-12-07

How to Cite

Mani Upadhyaya, Y., Raj Kharel, K. ., Poudel, O. ., & Acharya, P. (2024). Impact of Financial Deepening on Economic Growth in Nepal. Nepalese Journal of Insurance and Social Security, 7(1), 32–43. Retrieved from https://nepjol.info./index.php/njiss/article/view/72613

Issue

Vol. 7 No. 1 (2024)

Section

Articles

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