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Refine your search Apply to external sourcesEffects of remittances on economic growth and financial sector development in Nepal / Jyoti Kafle
Title : Effects of remittances on economic growth and financial sector development in Nepal Material Type: printed text Authors: Jyoti Kafle, Author Publication Date: 2014 Pagination: 96p. Size: GRP/Thesis Accompanying material: 2/B General note: Including bibilography Languages : English Descriptors: Banks
Banks and banking
Commercial banks
Economic development
Economic growth
NepalKeywords: 'economic growth commercial bank bank bank and banking economic development nepal' Class number: 338.9 Abstract: Remittances are the major sources of foreign exchange earnings and important implications for the remittance-recipient countries because of their increasing volume. Inflow of remittance, being a prime source of foreign currency and thereby a contribution to the national economy plays a significant role in the context of the developing nations. Since 2000, remittance inflow has been rising by an average rate of 16% per annum in the developing countries (World Bank, 2006). In recent years Nepalese economy has been named “remittance economy” as remittance constitutes almost 23% of GDP of the country (Economic Survey, 2012). Since remittance has brought macroeconomic stability by securing large chunk of foreign reserve of the country and provided income source for the households, identification of effects of remittances in economic development and financial sector in Nepal is crucial. Another critical issue with remittance in Nepal is whether growing contributions from remittance income to Nepal’s national and household economies will be sustainable. The major objective of this study is to investigate the causal relationship between foreign remittances, banking sector development and GDP for Nepal.
The review of literature has shown relationship between various factors such as money supply to GDP (M2/GDP), sum of demand, time, saving and foreign currency deposits to GDP (DEP/GDP), private sector divided by GDP (LOAN/GDP), credit provided by the banking sector to GDP (CREDIT/GDP), Capital Formation, of Openness (proxy by imports and exports to GDP), Remittance Inflows, etc. in the case of many countries.
In addition, some of the study found that remittances and banking sector development influence per capita income. It also showed that Banking sector development, as measured by the private sector credit disbursement by the banking system, is significantly affected by both remittance flow and GDP. Whereas some found that there is a long-run equilibrium relationship between GDP and remittance inflows, exchange rate, foreign direct investment, openness and capital formation. Based on the literature reviews, this study has proposed the conceptual framework indentifying remittances inflow, Gross capital formation, total trade, total deposits and other variables as the most important factors that determine the economic growth and financial sector development in the context of Nepal.
This study is based on primary as well as secondary data. This study has been used time series data to analyze the relationship between remittances and its determinants. For the purpose of study required data of dependent variables (GDP per capita, broad money supply, private sector credit, and total consumption) and independent variables (gross capital formation and its lag, total trade and its lag, foreign aid and its lag, total deposit and its lag, and also lag of all independent variables) are collected from various secondary sources for the period of 1993 to 2012.Primary survey questionnaire is conducted in order to assess the opinion of remittance receiver regarding the uses of remittances and its effect. The questionnaires used for the primary survey contain the general, yes no, tick mark, ranking, five point Likert scale and open end questions designed to assess the effects of remittances in economic growth and financial sector. Likewise, multiple regression analysis and correlation analysis are used to examine the effects of remittances on economic growth and financial sector development.
The study reveals that foreign aid and lag of GDP per capita have significant impact on GDP per capita in Nepal. Further it find out that remittance and GDP per capita are positively related but p-value shows that it is insignificant which meant that even thought they are positively related but result shows that remittance have no impact in GDP per capita. Further this study finds out that total remittance inflows are positively related with broad money supply but lag of total remittance inflows have more significant impact on broad money supply compared to total remittances inflow of current year. This study also find out that total remittance inflows as well as lagged total remittance inflows does not have any effect on private sector credit this result is contradict to the result of survey result and total remittance inflows as well as lagged total remittance inflows also does not have any effect on total consumption this result is also contradict with the findings of survey result. Remittance per capita, Gross capital formation , total trade, lag of remittance per capita ,Gross capital formation , total trade and foreign aid does not affects the GDP per capita in Nepal. The correlation analysis of Broad money supply and its determinants are positively related with Broad money supply. The correlation analysis of private sector credit and its determinants showed that the total remittances inflow and lag of total remittances inflow are positively related with private sector credit.
Based on the primary survey results, most of the respondents (97.6%) reveal that they have maintained bank account in Bank and Financial institutions. The respondent who have maintained bank account, among them most of them have maintained saving account. Likewise, the primary survey results indicate that on average majority (72%) of the respondent use official method of transaction and remaining 28% of the respondent use unofficial method of transaction. The results also indicate that the most important factor to the recipient of remittance is the Safety of remitted funds and speed to receive their money. Further it is found that remitted funds are mostly used for consumption purpose, followed by investment in different sectors, saving and lending of remitted funds. Some of the other findings of the survey are: People use unofficial method of transaction because they find it difficult to use official method, when the household started receiving remittances periodically, they will desire to store the funds safely in banks or other financial institutions. Likewise the propensity to demand other Financial Products rises with the rise in remittances. The remittance also helps to increase the cash flow in the country and the remitted money is also used in lending purpose for interest income by individual and family.
Thus, remittance inflows to Nepalese economy have positive effects on macro-economic variables and growth of country. A positive social impact can also be seen. So, the benefits associated with remittance inflows have multiplier effects driving the whole economy towards growth as remittance fuels up growth for other sectors like banking and investment, education, healthcare, construction, etc. However, still there are various cons associated with remittance economy.
The recommendation put forward by this study is that to bring recipient households into the formal financial sector is only the first step in using remittances more effectively and the banker must have to pay attractive interest rate and offer attractive scheme so, that they can receive deposit and invest in big project. The study remains enough ground for future researcher in the same topic. The future studies can be carried out by conducting research between remittances and economic growth or between remittances and financial sector development. Similarly future research can be done on effects of remittances on commercial and development banks only. Further studies are suggested to extend the survey of at least one district or development region.
Effects of remittances on economic growth and financial sector development in Nepal [printed text] / Jyoti Kafle, Author . - 2014 . - 96p. ; GRP/Thesis + 2/B.
Including bibilography
Languages : English
Descriptors: Banks
Banks and banking
Commercial banks
Economic development
Economic growth
NepalKeywords: 'economic growth commercial bank bank bank and banking economic development nepal' Class number: 338.9 Abstract: Remittances are the major sources of foreign exchange earnings and important implications for the remittance-recipient countries because of their increasing volume. Inflow of remittance, being a prime source of foreign currency and thereby a contribution to the national economy plays a significant role in the context of the developing nations. Since 2000, remittance inflow has been rising by an average rate of 16% per annum in the developing countries (World Bank, 2006). In recent years Nepalese economy has been named “remittance economy” as remittance constitutes almost 23% of GDP of the country (Economic Survey, 2012). Since remittance has brought macroeconomic stability by securing large chunk of foreign reserve of the country and provided income source for the households, identification of effects of remittances in economic development and financial sector in Nepal is crucial. Another critical issue with remittance in Nepal is whether growing contributions from remittance income to Nepal’s national and household economies will be sustainable. The major objective of this study is to investigate the causal relationship between foreign remittances, banking sector development and GDP for Nepal.
The review of literature has shown relationship between various factors such as money supply to GDP (M2/GDP), sum of demand, time, saving and foreign currency deposits to GDP (DEP/GDP), private sector divided by GDP (LOAN/GDP), credit provided by the banking sector to GDP (CREDIT/GDP), Capital Formation, of Openness (proxy by imports and exports to GDP), Remittance Inflows, etc. in the case of many countries.
In addition, some of the study found that remittances and banking sector development influence per capita income. It also showed that Banking sector development, as measured by the private sector credit disbursement by the banking system, is significantly affected by both remittance flow and GDP. Whereas some found that there is a long-run equilibrium relationship between GDP and remittance inflows, exchange rate, foreign direct investment, openness and capital formation. Based on the literature reviews, this study has proposed the conceptual framework indentifying remittances inflow, Gross capital formation, total trade, total deposits and other variables as the most important factors that determine the economic growth and financial sector development in the context of Nepal.
This study is based on primary as well as secondary data. This study has been used time series data to analyze the relationship between remittances and its determinants. For the purpose of study required data of dependent variables (GDP per capita, broad money supply, private sector credit, and total consumption) and independent variables (gross capital formation and its lag, total trade and its lag, foreign aid and its lag, total deposit and its lag, and also lag of all independent variables) are collected from various secondary sources for the period of 1993 to 2012.Primary survey questionnaire is conducted in order to assess the opinion of remittance receiver regarding the uses of remittances and its effect. The questionnaires used for the primary survey contain the general, yes no, tick mark, ranking, five point Likert scale and open end questions designed to assess the effects of remittances in economic growth and financial sector. Likewise, multiple regression analysis and correlation analysis are used to examine the effects of remittances on economic growth and financial sector development.
The study reveals that foreign aid and lag of GDP per capita have significant impact on GDP per capita in Nepal. Further it find out that remittance and GDP per capita are positively related but p-value shows that it is insignificant which meant that even thought they are positively related but result shows that remittance have no impact in GDP per capita. Further this study finds out that total remittance inflows are positively related with broad money supply but lag of total remittance inflows have more significant impact on broad money supply compared to total remittances inflow of current year. This study also find out that total remittance inflows as well as lagged total remittance inflows does not have any effect on private sector credit this result is contradict to the result of survey result and total remittance inflows as well as lagged total remittance inflows also does not have any effect on total consumption this result is also contradict with the findings of survey result. Remittance per capita, Gross capital formation , total trade, lag of remittance per capita ,Gross capital formation , total trade and foreign aid does not affects the GDP per capita in Nepal. The correlation analysis of Broad money supply and its determinants are positively related with Broad money supply. The correlation analysis of private sector credit and its determinants showed that the total remittances inflow and lag of total remittances inflow are positively related with private sector credit.
Based on the primary survey results, most of the respondents (97.6%) reveal that they have maintained bank account in Bank and Financial institutions. The respondent who have maintained bank account, among them most of them have maintained saving account. Likewise, the primary survey results indicate that on average majority (72%) of the respondent use official method of transaction and remaining 28% of the respondent use unofficial method of transaction. The results also indicate that the most important factor to the recipient of remittance is the Safety of remitted funds and speed to receive their money. Further it is found that remitted funds are mostly used for consumption purpose, followed by investment in different sectors, saving and lending of remitted funds. Some of the other findings of the survey are: People use unofficial method of transaction because they find it difficult to use official method, when the household started receiving remittances periodically, they will desire to store the funds safely in banks or other financial institutions. Likewise the propensity to demand other Financial Products rises with the rise in remittances. The remittance also helps to increase the cash flow in the country and the remitted money is also used in lending purpose for interest income by individual and family.
Thus, remittance inflows to Nepalese economy have positive effects on macro-economic variables and growth of country. A positive social impact can also be seen. So, the benefits associated with remittance inflows have multiplier effects driving the whole economy towards growth as remittance fuels up growth for other sectors like banking and investment, education, healthcare, construction, etc. However, still there are various cons associated with remittance economy.
The recommendation put forward by this study is that to bring recipient households into the formal financial sector is only the first step in using remittances more effectively and the banker must have to pay attractive interest rate and offer attractive scheme so, that they can receive deposit and invest in big project. The study remains enough ground for future researcher in the same topic. The future studies can be carried out by conducting research between remittances and economic growth or between remittances and financial sector development. Similarly future research can be done on effects of remittances on commercial and development banks only. Further studies are suggested to extend the survey of at least one district or development region.
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Barcode Call number Media type Location Section Status 60/D 338.9 KAF Thesis/Dissertation Uniglobe Library Social Sciences Available
Title : Financial development and economic growth nexus: evidence from Nepal Material Type: printed text Authors: Somnath Kandel, Author Publication Date: 2016 Pagination: 79p. Size: GRP/Thesis Accompanying material: 5/B General note: Including bibilography Languages : English Descriptors: Banks
Banks and banking
Economic development
Economic growthKeywords: 'economic growth commercial bank bank bank and banking economic development nepal' Class number: 338.9 Abstract: This study has been conducted to know the long run, short run relationship and causality direction between financial development and economic growth in Nepal by using the time series data of 1970 to 2015. The relationship between financial development and economic growth has received considerable attention in the past several decades. Although there is almost a psychological consensus in all kinds of economics (developed, developing and underdeveloped economy) that financial system play important role for long run economic growth; debate on a direction of causation and level of causation either from finance to growth or vice versa is still ongoing.There are two distinct views of the finance-growth nexus in the traditional development economics. The first view was first proposed by Schumpeter(1911) who contends that services provided by financial intermediaries are essential drivers of innovation and growth. Thus, well-developed financial systems channel financial resources to their most productive use. Schumpeter's view was later formalized by Goldsmith(1969) and so many other studies. In oppose other view which believes real economic growth makes increment of financial activities consequently financial development is possible. This alternative idea was initially proposed by Robinson(1952) later on so many other studies such as Patrick(1966) and Ireland(1994) followed the idea of Robinson.
Since there contemporary literatures are divided on a causality effect of finance growth relationship, this study has also a primary objective to find out the directional of effect between these two sectors. To measure the financial development four different proxy namely i) Broad money to nominal GDP (M2/Y), ii) Domestic credit no nominal GDP (DC/Y), iii) Private sector credit to nominal GDP (PSC/Y) and iv) Commercial bank assets to total assets of commercial bank plus Nepal Rastra Bank (CBA/TA) are used. Similarly to measure the economic growth real GDP per capita (RY/P) is used.
This study has employed causal comparative research designs to deal with financial development and economic growth in context of Nepal. This study is based on secondary sources of data. The sample size has been taken from the 1970 AD to 2015 AD. Total 46 years data has been used. The econometric models used for secondary data analysis consists: i) Augmented Dickey-Fuller test: to test the stationarity of data, ii) Johansen co-integration test: to test the long run relationship between pair wise variable of economic growth and financial development, iii) Granger Causality test: to test the causal relationship and direction of causality between the pair wise variable of economic growth and financial development, and iv) Vector Error Correction Model (VECM): to test the short run dynamics and direction of short run causality between pair wise variable of economic growth and financial development.
This study has found the long run co-integrating relationship and bi-directional causality between financial development and economic growth in Nepalese time series data from 1970 to 2015. This finding is identical with contemporary studies such as Demetriades & Luintel (1996a) of India, Demirhan et al.(2011) of Turkey, Saad(2014) of Lebanon and Oguntade et al.(2014) of Federal Republic of Nigeria. Moreover the findings of this study are consistent with Nepalese studies such as Gautam(2014). However, majority of finding of this study do not support to the studies such as Timsina(2014) and Bhandari & Acharya(2015) who found only uni-directional causality ‘between real GDP per-capita and private sector credit to nominal GDP’. This study partially support to Bista(2016) who found stable long run relationship between financial developments to economic growth in Nepal.
The study supports both demand driven and supply leading hypothesis in case of Nepal. Financial liberalization has improved the functioning of financial system by increasing the availability of funds and allowing risk diversification and increased investment in Nepal because the evidence shows that volume of credit released by Nepalese BFIs to the market was tremendously increased after the 1990 AD when the government adopted the liberalized economic policy in Nepal. This study has identified one phenomenon of Nepalese economy. The developing pace rate of DC/Y and PSC/Y (major proxies of financial development) is statistically found faster than those of economic growth during the period of 1970 to 2015. Therefore, it is justifiable to conclude that the pace of economic growth is too slow as compare to the pace of financial development in Nepal.
Based on the finding recommendation has given that: government and other concern body should emphasize more on how to speed up the economic growth of Nepal by prioritizing the demand driven hypothesis of finance growth relationship. Finally, findings of this study are constrained by the measuring capacity of variables, econometric model used in this study and coverage of Nepalese financial system. There is a more room for further research by using more impactful variables, incorporating the data of other financial sectors of Nepal such as NEPSE, insurance sector, provident funds etc.Financial development and economic growth nexus: evidence from Nepal [printed text] / Somnath Kandel, Author . - 2016 . - 79p. ; GRP/Thesis + 5/B.
Including bibilography
Languages : English
Descriptors: Banks
Banks and banking
Economic development
Economic growthKeywords: 'economic growth commercial bank bank bank and banking economic development nepal' Class number: 338.9 Abstract: This study has been conducted to know the long run, short run relationship and causality direction between financial development and economic growth in Nepal by using the time series data of 1970 to 2015. The relationship between financial development and economic growth has received considerable attention in the past several decades. Although there is almost a psychological consensus in all kinds of economics (developed, developing and underdeveloped economy) that financial system play important role for long run economic growth; debate on a direction of causation and level of causation either from finance to growth or vice versa is still ongoing.There are two distinct views of the finance-growth nexus in the traditional development economics. The first view was first proposed by Schumpeter(1911) who contends that services provided by financial intermediaries are essential drivers of innovation and growth. Thus, well-developed financial systems channel financial resources to their most productive use. Schumpeter's view was later formalized by Goldsmith(1969) and so many other studies. In oppose other view which believes real economic growth makes increment of financial activities consequently financial development is possible. This alternative idea was initially proposed by Robinson(1952) later on so many other studies such as Patrick(1966) and Ireland(1994) followed the idea of Robinson.
Since there contemporary literatures are divided on a causality effect of finance growth relationship, this study has also a primary objective to find out the directional of effect between these two sectors. To measure the financial development four different proxy namely i) Broad money to nominal GDP (M2/Y), ii) Domestic credit no nominal GDP (DC/Y), iii) Private sector credit to nominal GDP (PSC/Y) and iv) Commercial bank assets to total assets of commercial bank plus Nepal Rastra Bank (CBA/TA) are used. Similarly to measure the economic growth real GDP per capita (RY/P) is used.
This study has employed causal comparative research designs to deal with financial development and economic growth in context of Nepal. This study is based on secondary sources of data. The sample size has been taken from the 1970 AD to 2015 AD. Total 46 years data has been used. The econometric models used for secondary data analysis consists: i) Augmented Dickey-Fuller test: to test the stationarity of data, ii) Johansen co-integration test: to test the long run relationship between pair wise variable of economic growth and financial development, iii) Granger Causality test: to test the causal relationship and direction of causality between the pair wise variable of economic growth and financial development, and iv) Vector Error Correction Model (VECM): to test the short run dynamics and direction of short run causality between pair wise variable of economic growth and financial development.
This study has found the long run co-integrating relationship and bi-directional causality between financial development and economic growth in Nepalese time series data from 1970 to 2015. This finding is identical with contemporary studies such as Demetriades & Luintel (1996a) of India, Demirhan et al.(2011) of Turkey, Saad(2014) of Lebanon and Oguntade et al.(2014) of Federal Republic of Nigeria. Moreover the findings of this study are consistent with Nepalese studies such as Gautam(2014). However, majority of finding of this study do not support to the studies such as Timsina(2014) and Bhandari & Acharya(2015) who found only uni-directional causality ‘between real GDP per-capita and private sector credit to nominal GDP’. This study partially support to Bista(2016) who found stable long run relationship between financial developments to economic growth in Nepal.
The study supports both demand driven and supply leading hypothesis in case of Nepal. Financial liberalization has improved the functioning of financial system by increasing the availability of funds and allowing risk diversification and increased investment in Nepal because the evidence shows that volume of credit released by Nepalese BFIs to the market was tremendously increased after the 1990 AD when the government adopted the liberalized economic policy in Nepal. This study has identified one phenomenon of Nepalese economy. The developing pace rate of DC/Y and PSC/Y (major proxies of financial development) is statistically found faster than those of economic growth during the period of 1970 to 2015. Therefore, it is justifiable to conclude that the pace of economic growth is too slow as compare to the pace of financial development in Nepal.
Based on the finding recommendation has given that: government and other concern body should emphasize more on how to speed up the economic growth of Nepal by prioritizing the demand driven hypothesis of finance growth relationship. Finally, findings of this study are constrained by the measuring capacity of variables, econometric model used in this study and coverage of Nepalese financial system. There is a more room for further research by using more impactful variables, incorporating the data of other financial sectors of Nepal such as NEPSE, insurance sector, provident funds etc.Hold
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Barcode Call number Media type Location Section Status 260/D 338.9 KAN Thesis/Dissertation Uniglobe Library Social Sciences Available
Title : Financial structure and economic growth : a case of Nepal Material Type: printed text Authors: Himalayan Bam, Author Publication Date: 2015 Pagination: 87p. Size: GRP/Thesis Accompanying material: 5/B General note: Including bibilography Languages : English Descriptors: Banks
Banks and banking
Economic development
Economic growthKeywords: 'economic growth commercial bank bank bank and banking economic development nepal' Class number: 338.9 Financial structure and economic growth : a case of Nepal [printed text] / Himalayan Bam, Author . - 2015 . - 87p. ; GRP/Thesis + 5/B.
Including bibilography
Languages : English
Descriptors: Banks
Banks and banking
Economic development
Economic growthKeywords: 'economic growth commercial bank bank bank and banking economic development nepal' Class number: 338.9 Hold
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Barcode Call number Media type Location Section Status 84/D 338.9 BAM Thesis/Dissertation Uniglobe Library Technology Available
Title : Impact of bank lending on economic growth of Nepal Material Type: printed text Authors: Srijana Thapa, Author Publication Date: 2017 Pagination: 97p. Size: Book Accompanying material: 10/B Languages : English Descriptors: Economic development
Economic growthKeywords: 'economic growth commercial bank bank bank and banking economic development nepal' Class number: 338.9 Abstract: Bank lending refers to the funds granted to individuals and organizations to meet their temporary or long- term deficit operations (Mbat, 2006). Bank lending includes short, medium and long-term loans and advances. Bank lending activities generate economic growth through resources provision for real investment (Mckinnon, 2010). Lending activities of various commercial banks depend on the willingness to extend much credit to some sectors of the economy. Economic growth is an increase in the values of goods and services produced by an economy (Mishkin and Calvo, 2003). It is measured as the percentage rate of increase in real GDP.
Habibullah and Eng (2006) found that bank lending has positive relationship with economic growth. Likewise, Mamman and Hashim (2014) reveled that there is significant positive impact of bank lending on economic growth in Nigeria. Koivu (2002) also found that bank lending has significantly positive and causal impact on economic growth. The bank credit helps to increase the economic performance (Ugoani, 2013). Jaffee (2001) assessed that bank efficiency is significantly and positively related to economic output. Husain et. al (2015) concluded that interest rate and inflation have a negative impact on RGDP. Faria and Carneiro (2001) found that although there is a negative relationship between inflation and economic growth in the short-run, inflation does not affect economic growth in the long-run. However, Chimobi (2010) concluded that there is no long run relationship between inflation and economic growth in Nigeria. Similarly, Beck et al. (2002) accounted a positive relationship between economic growth and inflation in short run.
In the context of Nepal, Gautam (2014) revealed that financial development causes economic growth. In fact, financial development is the cause of economic growth in terms of short-term dynamics, while economic growth sustains financial development in long run. Adhikari (2014) concluded that net effect of inflation is positive on the growth of Nepalese economy. Budha (2013) concluded that real GDP growth is found to be positively affecting the bank's loan growth. Likewise, Kharel and Pokharel (2012) argued that banking sector plays a key role in promoting economic growth compared to capital market in Nepal. Timsina (2014) found a positive relationship of bank credit to the private sector on the economic growth in the long run. Bist (2016) found a negative relationship between inflation and real gross domestic product growth in long run. However, the relationship is positive in the case of short run.
The study reveals that there is long run co- integrating relationship between bank lending and economic growth in Nepal. The study shows that lending interest rate has long run negative relationship with economic growth. This study also finds that domestic credit to private sector have long-run positive relationship with economic growth. Similarly, money supply and government expenditure have positive relationship with gross fixed capital formation. However, the result shows that government expenditure has negative relationship with real gross domestic product in the long-run. The estimates of error correction model show that beta coefficients are negative for lending interest rate, inflation and total assets whereas the beta coefficients are positive for money supply and domestic credit to private sector. However, the coefficients are significant only for money supply, total assets and credit to private sector with economic growth. The granger causality depicts that there is unidirectional causality from money supply to gross fixed capital formation. Similarly, there exits unidirectional causality between interest rate and gross fixed capital formation, domestic credit to private sector and gross fixed capital formation and government expenditure to gross capital formation. However, that there is no causal relationship between inflation and gross fixed capital formation. There is unidirectional causality form inflation to real gross domestic product growth. It indicates that inflation has impact on the real gross domestic product growth. On the other hand, the results show that there is no causal relationship of money supply, government expenditure, lending interest rate, total assets, interest rate and domestic credit to private sector with real gross domestic product growth.
Impact of bank lending on economic growth of Nepal [printed text] / Srijana Thapa, Author . - 2017 . - 97p. ; Book + 10/B.
Languages : English
Descriptors: Economic development
Economic growthKeywords: 'economic growth commercial bank bank bank and banking economic development nepal' Class number: 338.9 Abstract: Bank lending refers to the funds granted to individuals and organizations to meet their temporary or long- term deficit operations (Mbat, 2006). Bank lending includes short, medium and long-term loans and advances. Bank lending activities generate economic growth through resources provision for real investment (Mckinnon, 2010). Lending activities of various commercial banks depend on the willingness to extend much credit to some sectors of the economy. Economic growth is an increase in the values of goods and services produced by an economy (Mishkin and Calvo, 2003). It is measured as the percentage rate of increase in real GDP.
Habibullah and Eng (2006) found that bank lending has positive relationship with economic growth. Likewise, Mamman and Hashim (2014) reveled that there is significant positive impact of bank lending on economic growth in Nigeria. Koivu (2002) also found that bank lending has significantly positive and causal impact on economic growth. The bank credit helps to increase the economic performance (Ugoani, 2013). Jaffee (2001) assessed that bank efficiency is significantly and positively related to economic output. Husain et. al (2015) concluded that interest rate and inflation have a negative impact on RGDP. Faria and Carneiro (2001) found that although there is a negative relationship between inflation and economic growth in the short-run, inflation does not affect economic growth in the long-run. However, Chimobi (2010) concluded that there is no long run relationship between inflation and economic growth in Nigeria. Similarly, Beck et al. (2002) accounted a positive relationship between economic growth and inflation in short run.
In the context of Nepal, Gautam (2014) revealed that financial development causes economic growth. In fact, financial development is the cause of economic growth in terms of short-term dynamics, while economic growth sustains financial development in long run. Adhikari (2014) concluded that net effect of inflation is positive on the growth of Nepalese economy. Budha (2013) concluded that real GDP growth is found to be positively affecting the bank's loan growth. Likewise, Kharel and Pokharel (2012) argued that banking sector plays a key role in promoting economic growth compared to capital market in Nepal. Timsina (2014) found a positive relationship of bank credit to the private sector on the economic growth in the long run. Bist (2016) found a negative relationship between inflation and real gross domestic product growth in long run. However, the relationship is positive in the case of short run.
The study reveals that there is long run co- integrating relationship between bank lending and economic growth in Nepal. The study shows that lending interest rate has long run negative relationship with economic growth. This study also finds that domestic credit to private sector have long-run positive relationship with economic growth. Similarly, money supply and government expenditure have positive relationship with gross fixed capital formation. However, the result shows that government expenditure has negative relationship with real gross domestic product in the long-run. The estimates of error correction model show that beta coefficients are negative for lending interest rate, inflation and total assets whereas the beta coefficients are positive for money supply and domestic credit to private sector. However, the coefficients are significant only for money supply, total assets and credit to private sector with economic growth. The granger causality depicts that there is unidirectional causality from money supply to gross fixed capital formation. Similarly, there exits unidirectional causality between interest rate and gross fixed capital formation, domestic credit to private sector and gross fixed capital formation and government expenditure to gross capital formation. However, that there is no causal relationship between inflation and gross fixed capital formation. There is unidirectional causality form inflation to real gross domestic product growth. It indicates that inflation has impact on the real gross domestic product growth. On the other hand, the results show that there is no causal relationship of money supply, government expenditure, lending interest rate, total assets, interest rate and domestic credit to private sector with real gross domestic product growth.
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Barcode Call number Media type Location Section Status 362/D 338.9THA Thesis/Dissertation Uniglobe Library Social Sciences Available
Title : Impact of financial development on economic growth Material Type: printed text Authors: Pushpam Dhungana, Author Publication Date: 2017 Pagination: 104p. Size: GRP/Thesis Languages : English Descriptors: Economic growth Class number: 338.9 Abstract: The relationship between financial development and economic growth has received considerable attention in the past several decades. Development of financial system is an important for economic growth. The better financial services expand the scope and the improve the efficiency of innovative activity; they thereby accelerate economic growth (King& Levine, 1993b). It is clearly seen that the countries having a better financial system have a tendency to develop its economic growth more quickly and easily. Pagon (1993) detailed financial intermediation can distress economic growth by acting on the saving rate, on the fraction of saving channeled to investment, or on the social marginal productivity of investment.
Country’s economy will gradually be raised if there is a good integrity between financial institutions, broad and deep capital markets, reduction in corruption and improved banks performance with better quality services. Favara (2003) studied the relationship between financial development and economic growth and found no evidence for the impact of financial development on growth patterns by using two financial development indicators i.e. liquid liabilites credit to private sector.According to Goldsmith (1969), there is positive correlation between financial development and economic growth and proved that the financial system is directly related to the supply and quality of financial intermediation. Dornbush and Reynoso (1989) argued that financial factors plays a dynamic role when financial instability becomes a governing force in the economy.
In Nepalese context, the central bank i.e. Nepal Rastra Bank regulates the banking sector including commercial banks, development banks, finance companies and mircro credit development banks or institutions.Nepal should expand and improve their credit and investment system through appropriate regulatory and policy reforms in order to support higher economy growth (OanhThiVuong, 2013). Bhetuwal (2007) stated that financial sector reform was incorporated in macroeconoic polices to improve business conditions and enhance economic activities. According to Gautam (2014), financial development causes economic growth. In fact, financial development is the cause of economic growth in terms of short-term dynamics, while economic growth sustains financial development in long run.Shrestha (2005) examined the relatiionship between financial development and economic growth and found that financial development is positively related to growth and negatively associated to income equality and financial stability.
The major objective of this study is to examine the relationship between financial development and economic growth in Nepal. In addition, this study is conducted to ascertain the co-integration between financial development and economic growth variables. The major sources of data are Quarterly Economic Bulletin published by Nepal Rastra Bank and an Economic Survey published by Ministry of Finance for the period of 1975 to 2015. Real gross domestic product and gross capital formation have been taken as an indicator for economic growth. Similarly, to measure the financial development five different proxy namely total loans, inflation, money supply, interest spread rate and government expenditure are used.
The augmented dickey fuller test reveals that inflation is stationary at the level, whereas, other variables are stationary at first difference. This test also reveals that none of the variables are stationary at the second difference. The ARDL bound test shows that there is co-integration relationship between financial development and economic growth variables. Interest spread rate is negatively significant with economic growth in the long run as well as short run in the context of Nepal. This indicate that higher the interest spread rate lower will be economic growth in the long run as well as in short run. Similarly, government expenditure is positively significant with economic growth in long run indicating higher the government expenditure higher will be economic growth in long run and is insignificant in short run. However, money supply is positively significant with economic growth in short run and real gross domestic product in long run indicating higher the money supply in market higher will be economic growth in short run. Further, the result shows that inflation does not have an impact on economic growth in context of Nepal.
Moreover, study reveals that the entire coefficients remain within the critical bound of stability parameter which depicts the stability of coefficient over the period, and the selected models are to be good. Therefore, the study suggests that the policy maker and concerned bodies should give emphasis on expenditure to increase the growth, reduce the spread rate and supply money in the market to increase growth and also look forward in the economic policies that enhance the speed of economic growth and uplift the living standard of people.
Impact of financial development on economic growth [printed text] / Pushpam Dhungana, Author . - 2017 . - 104p. ; GRP/Thesis.
Languages : English
Descriptors: Economic growth Class number: 338.9 Abstract: The relationship between financial development and economic growth has received considerable attention in the past several decades. Development of financial system is an important for economic growth. The better financial services expand the scope and the improve the efficiency of innovative activity; they thereby accelerate economic growth (King& Levine, 1993b). It is clearly seen that the countries having a better financial system have a tendency to develop its economic growth more quickly and easily. Pagon (1993) detailed financial intermediation can distress economic growth by acting on the saving rate, on the fraction of saving channeled to investment, or on the social marginal productivity of investment.
Country’s economy will gradually be raised if there is a good integrity between financial institutions, broad and deep capital markets, reduction in corruption and improved banks performance with better quality services. Favara (2003) studied the relationship between financial development and economic growth and found no evidence for the impact of financial development on growth patterns by using two financial development indicators i.e. liquid liabilites credit to private sector.According to Goldsmith (1969), there is positive correlation between financial development and economic growth and proved that the financial system is directly related to the supply and quality of financial intermediation. Dornbush and Reynoso (1989) argued that financial factors plays a dynamic role when financial instability becomes a governing force in the economy.
In Nepalese context, the central bank i.e. Nepal Rastra Bank regulates the banking sector including commercial banks, development banks, finance companies and mircro credit development banks or institutions.Nepal should expand and improve their credit and investment system through appropriate regulatory and policy reforms in order to support higher economy growth (OanhThiVuong, 2013). Bhetuwal (2007) stated that financial sector reform was incorporated in macroeconoic polices to improve business conditions and enhance economic activities. According to Gautam (2014), financial development causes economic growth. In fact, financial development is the cause of economic growth in terms of short-term dynamics, while economic growth sustains financial development in long run.Shrestha (2005) examined the relatiionship between financial development and economic growth and found that financial development is positively related to growth and negatively associated to income equality and financial stability.
The major objective of this study is to examine the relationship between financial development and economic growth in Nepal. In addition, this study is conducted to ascertain the co-integration between financial development and economic growth variables. The major sources of data are Quarterly Economic Bulletin published by Nepal Rastra Bank and an Economic Survey published by Ministry of Finance for the period of 1975 to 2015. Real gross domestic product and gross capital formation have been taken as an indicator for economic growth. Similarly, to measure the financial development five different proxy namely total loans, inflation, money supply, interest spread rate and government expenditure are used.
The augmented dickey fuller test reveals that inflation is stationary at the level, whereas, other variables are stationary at first difference. This test also reveals that none of the variables are stationary at the second difference. The ARDL bound test shows that there is co-integration relationship between financial development and economic growth variables. Interest spread rate is negatively significant with economic growth in the long run as well as short run in the context of Nepal. This indicate that higher the interest spread rate lower will be economic growth in the long run as well as in short run. Similarly, government expenditure is positively significant with economic growth in long run indicating higher the government expenditure higher will be economic growth in long run and is insignificant in short run. However, money supply is positively significant with economic growth in short run and real gross domestic product in long run indicating higher the money supply in market higher will be economic growth in short run. Further, the result shows that inflation does not have an impact on economic growth in context of Nepal.
Moreover, study reveals that the entire coefficients remain within the critical bound of stability parameter which depicts the stability of coefficient over the period, and the selected models are to be good. Therefore, the study suggests that the policy maker and concerned bodies should give emphasis on expenditure to increase the growth, reduce the spread rate and supply money in the market to increase growth and also look forward in the economic policies that enhance the speed of economic growth and uplift the living standard of people.
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Barcode Call number Media type Location Section Status 324/D 338.9 DHU Thesis/Dissertation Uniglobe Library Social Sciences Available
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