Advanced Search
MyIDEAS: Login to save this article or follow this journal

An Empirical Analysis of Money Supply Process in Nepal


Author Info

  • Prakash Kumar Shrestha Ph.D.

    (Nepal Rastra Bank)

Registered author(s):


    This paper examines the money supply process in Nepal empirically on the basis of mainstream and Post-Keynesian theoretical perspectives for both pre and post-liberalization period covering the sample period of 1965/66-2009/10. The relative contribution of different components of money supply has been computed and the money supply as well as money multiplier function has been estimated. Empirical results show that disposable high powered money is found to be a major contributor to the change in monetary aggregates without any significant structural break. However, the degree of controllability of high powered money is not strong, and neither CRR nor Bank Rate has been effective monetary policy tools so far. Open market operation is found statistically significant only at 10 percent level of significance to influence disposable high powered money. On the other hand, money multipliers are affected by currency ratio, time deposits ratio and excess reserve ratio, but not by CRR. On the other hand, Granger causality based test of Post-Keynesian hypothesis reveals that money supply endogeniety cannot be ruled out. Hence, monetary policy framework needs to be changed accordingly and OMO should be strengthened further.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL:
    Download Restriction: no

    Bibliographic Info

    Article provided by Nepal Rastra Bank, Research Department in its journal NRB Economic Review.

    Volume (Year): 25 (2013)
    Issue (Month): 2 (October)
    Pages: 17-42

    as in new window
    Handle: RePEc:nrb:journl:v:25:y:2013:i:2:p:17-42

    Contact details of provider:
    Web page:
    More information through EDIRC

    Related research

    Keywords: Money Supply; Monetary Policy; High-powered Money; Money Multiplier;

    Find related papers by JEL classification:


    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Nara Bahadur Thapa, 1997. "The Money Supply Function in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 9, pages 44-65, April.
    2. Sanusi, Aliyu Rafindadi, 2010. "An empirical analysis of the money supply process in Ghana: 1983-2006," MPRA Paper 29494, University Library of Munich, Germany, revised 2010.
    3. Michelle R. Garfinkel & Daniel L. Thornton, 1991. "The multiplier approach to the money supply process: a precautionary note," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 47-64.
    4. Kevin S. Nell, 1999. "The Endogenous/Exogenous Nature of South Africa's Money Supply Under Direct and Indirect Monetary Control Measures," Studies in Economics 9912, Department of Economics, University of Kent.
    5. Yi, Gang, 1992. "The money supply mechanism and monetary policy in China," Journal of Asian Economics, Elsevier, vol. 3(2), pages 217-238.
    6. Alfonso Palacio Vera, 2001. "The Endogenous Money Hypothesis: Some Evidence from Spain (1987-1998)," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 23(3), pages 509-526, April.
    Full references (including those not matched with items on IDEAS)



    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


    Access and download statistics


    When requesting a correction, please mention this item's handle: RePEc:nrb:journl:v:25:y:2013:i:2:p:17-42. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dr. Bishnu Prasad Gautam).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.