IDEAS home Printed from https://ideas.repec.org/a/nrb/journl/v23y2011i1p5.html

Monetary Neutrality in the Nepalese Economy during 1975-2008

Author

Listed:
  • Mukesh Khanal

    (Institute for Integrated Development Studies (IIDS), Kathmandu)

Abstract

One of the methods of measuring the effectiveness of monetary policies is via inspection of monetary neutrality in the economy. It is a concept from classical economics and it suggests that changes in nominal variables do not have any impact on real variables. This paper studies the presence or absence of effective monetary policy in Nepal between 1975 and 2008 by observing money supply (nominal side), and real GDP (real). Results suggest that an increase in money supply immediately lowers the real GDP in the short run, but has no effect on real GDP in the long run. This evidence suggests that Nepal Rastra Bank’s monetary policies between 1975 and 2008 may have been counter-productive in the short-run, but they were effective for long-run growth and stability of the Nepalese economy.

Suggested Citation

  • Mukesh Khanal, 2011. "Monetary Neutrality in the Nepalese Economy during 1975-2008," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 23(1), pages 71-91, April.
    • Handle: RePEc:nrb:journl:v:23:y:2011:i:1:p:5
    as

    Download full text from publisher

    File URL: https://www.nrb.org.np/contents/uploads/2019/12/Economic_Review_Occasional_Paper-No_23_April_20115_Monetary_Neutrality_in_the_Nepalese_Economy_during_1975-2008Mukesh-Khanal.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    2. Ryuzo Miyao, 2005. "Use Of The Money Supply In The Conduct Of Japan'S Monetary Policy: Re‐Examining The Time‐Series Evidence," The Japanese Economic Review, Japanese Economic Association, vol. 56(2), pages 165-187, June.
    3. Nephil Matangi Maskay Ph.D. & Rajendra Pandit, 2010. "Interest Rate Pass-Through in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 22, pages 1-18, April.
    4. 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.
    5. Robert E. Lucas, Jr., 1995. "Monetary Neutrality," Nobel Prize in Economics documents 1995-1, Nobel Prize Committee.
    6. Cripps, Francis, 1977. "The Money Supply, Wages and Inflation," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 1(1), pages 101-112, March.
    7. Nephil Matangi Maskay,Ph.D. & Rajendra Pandit, 2010. "Interest Rate Pass-Through in Nepal," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 22(1), pages 1-18, April.
    8. Robert Engle & Clive Granger, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    9. Jacobson, Tor & Jansson, Per & Vredin, Anders & Warne, Anders, 1999. "A VAR Model for Monetary Policy Analysis in a Small Open Economy," Working Paper Series 77, Sveriges Riksbank (Central Bank of Sweden).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mukesh Khanal, 2011. "Monetary Neutrality in the Nepalese Economy during 1975-2008," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 23(1), pages 71-91, April.
    2. Isabel Cortés-Jiménez & Manuel Artís, 2005. "The role of the tourism sector in economic development - Lessons from the Spanish experience," ERSA conference papers ersa05p488, European Regional Science Association.
    3. Ahmed, Khalid, 2015. "The sheer scale of China’s urban renewal and CO2 emissions: Multiple structural breaks, long-run relationship and short-run dynamics," MPRA Paper 71035, University Library of Munich, Germany.
    4. Hongbo Liu & Shuanglu Liang, 2019. "The Nexus between Energy Consumption, Biodiversity, and Economic Growth in Lancang-Mekong Cooperation (LMC): Evidence from Cointegration and Granger Causality Tests," IJERPH, MDPI, vol. 16(18), pages 1-15, September.
    5. Nafeesa Yunus & J. Hansz & Paul Kennedy, 2012. "Dynamic Interactions Between Private and Public Real Estate Markets: Some International Evidence," The Journal of Real Estate Finance and Economics, Springer, vol. 45(4), pages 1021-1040, November.
    6. Brada, Josef C. & Kutan, Ali M., 2001. "The convergence of monetary policy between candidate countries and the European Union," Economic Systems, Elsevier, vol. 25(3), pages 215-231, September.
    7. Maparu, Tuhin Subhra & Mazumder, Tarak Nath, 2017. "Transport infrastructure, economic development and urbanization in India (1990–2011): Is there any causal relationship?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 100(C), pages 319-336.
    8. Gil-Alana, Luis A. & Yaya, OlaOluwa S. & Akinsomi, Omokolade & Coskun, Yener, 2020. "How do stocks in BRICS co-move with real estate stocks?," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 93-101.
    9. Mighri, Zouheir & Ragoubi, Hanen & Sarwar, Suleman & Wang, Yihan, 2022. "Quantile Granger causality between US stock market indices and precious metal prices," Resources Policy, Elsevier, vol. 76(C).
    10. Tung Liu & Lee C. Spector, 2005. "Dynamic employment adjustments over business cycles," Empirical Economics, Springer, vol. 30(1), pages 151-169, January.
    11. Thomas A. Garrett & Russell M. Rhine, 2007. "Does government spending really crowd out charitable contributions? new time series evidence," Working Papers 2007-012, Federal Reserve Bank of St. Louis.
    12. Ali, Amjad & Ur Rehman, Hafeez, 2015. "Macroeconomic Instability and Its Impact on Gross Domestic Product: An Empirical Analysis of Pakistan," MPRA Paper 71037, University Library of Munich, Germany.
    13. Palazzi, Rafael Baptista & Meira, Erick & Klotzle, Marcelo Cabus, 2022. "The sugar-ethanol-oil nexus in Brazil: Exploring the pass-through of international commodity prices to national fuel prices," Journal of Commodity Markets, Elsevier, vol. 28(C).
    14. Martins IYOBOYI & Abdrelrasaq NA-ALLAH, 2014. "Innovation and economic growth: evidence from Nigeria," EuroEconomica, Danubius University of Galati, issue 1(33), pages 43-54, May.
    15. Gaolu Zou & K. W. Chau, 2019. "Long- and Short-Run Effects of Fuel Prices on Freight Transportation Volumes in Shanghai," Sustainability, MDPI, vol. 11(18), pages 1-12, September.
    16. Chien-Chiang Lee & Chun-Ping Chang, 2006. "The Long-Run Relationship Between Defence Expenditures And Gdp In Taiwan," Defence and Peace Economics, Taylor & Francis Journals, vol. 17(4), pages 361-385.
    17. Rosas Chimal, Mario Alberto & Flores Ortega, Miguel, 2017. "Calificación riesgo país y flujos de capital en México: 1998-2012/Country risk rating and capital flows in Mexico: 1998-2012," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 35, pages 191-216, Enero.
    18. Robaina, M. & Madaleno, M. & Silva, S. & Eusébio, C. & Carneiro, M.J. & Gama, C. & Oliveira, K. & Russo, M.A. & Monteiro, A., 2020. "The relationship between tourism and air quality in five European countries," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 261-272.
    19. Awasthi, Kritika & Ahmad, Wasim & Rahman, Abdul & Phani, B.V., 2020. "When US sneezes, clichés spread: How do the commodity index funds react then?," Resources Policy, Elsevier, vol. 69(C).
    20. D. Ventosa-Santaulària, 2009. "Spurious Regression," Journal of Probability and Statistics, Hindawi, vol. 2009, pages 1-27, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nrb:journl:v:23:y:2011:i:1:p:5. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Publication Division NRB (email available below). General contact details of provider: https://edirc.repec.org/data/nrbgvnp.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.