IDEAS home Printed from https://ideas.repec.org/a/nrb/journl/v35y2024i1p1.html

Forecasting Loanable Funds in Nepal's Banking System: A VECM Approach

Author

Listed:
  • Hom Nath Gaire

    (City Planning Commission, Pokhara Metropolitan City, Gandaki, Nepal)

Abstract

This paper tries to examine the performance of VECM model to forecast the amount of loanable funds in the banking system of Nepal. For this, monthly data of 14 years starting from July 2007 to June 2021 have been used in the systematic process of modeling and forecasting practices. The VECM model was estimated with the training dataset covering from 2007 to 2015 followed by examination and validation with the testing dataset covering 2015 to 2020. The empirical results reveal that the supply side factors (government expenditure and BoP) of loanable funds have got dominant power in comparison to the demand side factors (industrial investment and consumption) while determining the amount of loanable funds in the banking system. The forecast performance indicators confirm that the selected VECM model is capable enough in explaining the variations of the determinants that bring changes in the monthly amount of loanable funds of the banking system. As suggested by the results, the VECM modeling approach could be used for forecasting of loanable funds at the BFIs' level in the banking system of Nepal.

Suggested Citation

  • Hom Nath Gaire, 2023. "Forecasting Loanable Funds in Nepal's Banking System: A VECM Approach," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 35(1-2), pages 1-21, December.
    • Handle: RePEc:nrb:journl:v:35:y:2024:i:1:p:1
    as

    Download full text from publisher

    File URL: https://www.nrb.org.np/contents/uploads/2024/01/vol-35_art1.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Birendra Bahadur Budha, 2013. "The Bank Lending Channel of Monetary Policy of Nepal: Evidence from Bank Level," NRB Working Paper 17/2013, Nepal Rastra Bank, Research Department.
    2. Birendra Bahadur Budha, 2013. "The Bank Lending Channel of Monetary Policy in Nepal: Evidence from Bank Level Data," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 25(2), pages 43-65, October.
    3. Birendra Bahadur Budha, 2013. "The Bank Lending Channel of Monetary Policy in Nepal: Evidence from Bank Level Data," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 25(2), pages 43-65, October.
    4. repec:nrb:wpaper:nrbwp172013 is not listed on IDEAS
    5. Dung Viet Tran & David McMillan, 2020. "Funding liquidity and bank lending," Cogent Economics & Finance, Taylor & Francis Journals, vol. 8(1), pages 1734324-173, January.
    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. repec:nrb:journl:v:35:y:2023:i:1:p:1 is not listed on IDEAS
    2. Laxman Tandan & Ananta Raj Kafle & Khageshyor Khanal, 2022. "An Econometric Analysis on Interest Rate Reforms and Financial Deepening," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 12(3), pages 3-22.
    3. Samuel Tabot Enow, 2023. "Stock Market Liquidity during Periods of Distress and its Implications: Evidence from International Financial Markets," International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 1-6, January.
    4. Andrea Bellucci & Gianluca Gucciardi, 2024. "A Turning Point For Banking: Unraveling The Changing Landscape Of Banking Activity In Europe Since The Covid-19 Pandemic," Journal of Financial Management, Markets and Institutions (JFMMI), World Scientific Publishing Co. Pte. Ltd., vol. 12(02), pages 1-38, December.
    5. Jiang, Haiyun & Xu, Shulin & Cui, Jingwen & Subhani, Ghulam, 2023. "The impact of bank capital, liquidity and funding liquidity on sustainable bank lending: Evidence from MENA region," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 713-726.
    6. Faisal Abbas & Shoaib Ali & Imran Yousaf & Wing-Keung Wong, 2021. "Dynamics of Funding Liquidity and Risk-Taking: Evidence from Commercial Banks," JRFM, MDPI, vol. 14(6), pages 1-16, June.
    7. Silu Muduli & Shridhar Kumar Dash, 2025. "Funding Liquidity and Risk-Taking Behavior of Banks in India," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 24(1), pages 37-62, March.

    More about this item

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    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:35:y:2024:i:1:p:1. 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.