Modelling and Forecasting Fiscal Policy and Economic Growth in Nepal
This paper develops a macroeconomic forecasting model focusing on fiscal policy and economic growth in Nepal. The structure of the model, which comprises a total of 14 equations, allows alternative policy options for maintaining fiscal stability and promoting economic growth as well as switching deficit financing between domestic and foreign loans. We use annual data from 1992/93 to 2009/10 to estimate the model and provide out-sample forecasts for 2010/11 to 2012/13, consistent with the current Three Year Plan period, in order to evaluate the plan performance. The empirical evidence suggests that fiscal policy, particularly governments' capital expenditure affects economic growth positively and also crowds-in private investment. However, there exists a trade-off between fiscal stability and high level of economic growth as the policy goal of achieving both objectives seems to be unattainable. Finally, the out-sample forecast suggests that it is unlikely to attain the targeted economic growth in the Three Year Plan period from the planned fiscal outlay even if it is realized.
Volume (Year): 24 (2012)
Issue (Month): 1 (April)
|Contact details of provider:|| Web page: http://www.nrb.org.np/ecorev/|
More information through EDIRC
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.:
- Romer, Paul M, 1986.
"Increasing Returns and Long-run Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 94(5), pages 1002-1037, October.
- Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
- Eric M. Engen & Jonathan Skinner, 1992. "Fiscal Policy and Economic Growth," NBER Working Papers 4223, National Bureau of Economic Research, Inc.
- Charles I. Jones, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 495-525.
- Turnovsky, Stephen J, 2004. "The Transitional Dynamics of Fiscal Policy: Long-Run Capital Accumulation and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(5), pages 883-910, October.
- Stephen J. Turnovsky, 2000. "The Transitional Dynamics Of Fiscal Policy; Long-Run Capital Accumulation And Growth," Computing in Economics and Finance 2000 199, Society for Computational Economics.
- Stephen Turnovsky, 2000. "The Transitional Dynamics of Fiscal Policy: Long-run Capital Accumulation and Growth," Discussion Papers in Economics at the University of Washington 0018, Department of Economics at the University of Washington.
- Stephen Turnovsky, 2000. "The Transitional Dynamics of Fiscal Policy: Long-run Capital Accumulation and Growth," Working Papers 0018, University of Washington, Department of Economics.
- Stephen Turnovsky, 2002. "The Transitional Dynamics of Fiscal Policy: Long-run Capital Accumulation and Growth," Working Papers UWEC-2002-22-P, University of Washington, Department of Economics.
- Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
- Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
- Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers 130, University of Rochester - Center for Economic Research (RCER).
- Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
- Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
- William Easterly & Sergio Rebelo, 1993. "Fiscal Policy and Economic Growth: An Empirical Investigation," NBER Working Papers 4499, National Bureau of Economic Research, Inc.
- Easterly, William & Rebelo, Sérgio, 1994. "Fiscal Policy and Economic Growth: An Empirical Investigation," CEPR Discussion Papers 885, C.E.P.R. Discussion Papers.
- Min Bahadur Shrestha, Ph.D., 2006. "Testing for Unit Roots in Nepalese Macroeconomic Data," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 18, pages 1-19, April.
- Mehrotra, Aaron N. & Peltonen, Tuomas, 2005. "Socio-economic development and fiscal policy: lessons from the cohesion countries for the new member states," Working Paper Series 467, European Central Bank.
- Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
- Ram Sharan Kharel PhD & Tap Prasad Koirala PhD, 2011. "Spatial Price Integration in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 23(1), pages 21-36, April.
- Theodore Pelagidis & Evangelia Desli, 2004. "Deficits, growth, and the current slowdown: what role for fiscal policy?," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 26(3), pages 461-469, April.
- Peretto, Pietro F, 2003. "Fiscal Policy and Long-Run Growth in R&D-Based Models with Endogenous Market Structure," Journal of Economic Growth, Springer, vol. 8(3), pages 325-347, September.
- Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
- Khan, Mohsin S & Kumar, Manmohan S, 1997. "Public and Private Investment and the Growth Process in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(1), pages 69-88, February. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nrb:journl:v:24:y:2012:i:1:p:1-15. 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.