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Revisiting Money-Price Relationship in Nepal Following a New Methodological Framework

Author

Listed:
  • Min Bahadur Shrestha, Ph.D.

    (National Planning Commission of Nepal)

  • Guna Raj Bhatta

    (Research Department, Nepal Rastra Bank.)

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

Suggested Citation

  • Min Bahadur Shrestha, Ph.D. & Guna Raj Bhatta, 2018. "Revisiting Money-Price Relationship in Nepal Following a New Methodological Framework," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 30(1), pages 19-34, April.
    • Handle: RePEc:nrb:journl:v:30:y:2018:i:1:p:19
    as

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    File URL: https://www.nrb.org.np/contents/uploads/2021/10/Vol-30-art-2.pdf
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    References listed on IDEAS

    as
    1. Emeka Nkoro & Aham Kelvin Uko, 2016. "Autoregressive Distributed Lag (ARDL) cointegration technique: application and interpretation," Journal of Statistical and Econometric Methods, SCIENPRESS Ltd, vol. 5(4), pages 1-3.
    2. Guru Prasad Neupane, 1992. "Causes of Inflation in Nepal: An Quantitative Analysis," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 6, pages 33-49, April.
    3. James Laurenceson & Joseph C.H. Chai, 2003. "Financial Reform and Economic Development in China," Books, Edward Elgar Publishing, number 2714.
    4. Brillembourg, Arturo & Khan, Mohsin S, 1979. "The Relationship between Money, Income, and Prices: Has Money Mattered Historically? A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 358-365, August.
    5. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    6. Sushil Ram Mathema, 1998. "Determinants of Inflation with Special Reference to Wages in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 10, pages 1-18, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Money-price relationship; Inflation determinants; Nepal;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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