| Title : | Relationship between financial sector development and economic growth: a case of Nepal | | Material Type: | printed text | | Authors: | Binod Marasini, Author | | Publication Date: | 2018 | | Pagination: | 97p. | | Size: | GRP/Thesis | | Accompanying material: | 10/B | | Languages : | English | | Descriptors: | Economic growth
| | Class number: | 338.9 | | Abstract: | Financial system is very important in the economic growth of the country. The financial system could be financial institutions, financial market, financial instrument and financial services. A good financial system could help in the efficient mobilization of capital and channelize it in proper way towards economic prosperity. A growing body of evidence suggests that financial institutions (such as banks and insurance companies) and financial markets (including stock markets, bond markets, and derivative markets) exert a powerful influence on economic development, poverty alleviation, and economic stability (Levine, 2005). Financial intermediaries constitute a potentially important mechanism for long run economic growth. Without the existence of financial intermediaries, investments might not take place. The financial intermediaries enable the more effective exchange of goods and services, mobilizes individual and corporate savings and in the efficient allocation of resources that monitors corporate managements (Levine, 1997). Economic growth is the crucial means of uplifting living standards as well as achieving economic development. Economic growth provides the means for the formation of growth-promoting financial intermediaries. The formation of financial intermediaries accelerates growth by enhancing the allocation of capital (Greenwood and Jovanovic, 1989).
The major objective of the study is to examine the relationship between financial sector development and economic growth of Nepal. This study is based on the secondary sources of data that are collected from economic survey through 1995/96 to 2015/16 leading to a total of 22 observations. The data were collected from Economic Survey published by Ministry of Finance and World Development Indicators of World Bank. The study has employed descriptive and causal comparative research designs in order to investigate the impact of financial sector development on the economic growth in Nepal.
The descriptive analysis shows the highest total capital formation is found to be 39.1percent in 2015 while lowest is 20.25 with an average of 28.22 percent. The highest real gross domestic product growth is noticed to be 6.20 percent in 2000 while lowest is 0.12 percent with an average of 4.22 percent. The highest money supply is found to be 99.8 percent in 2016 while lowest is 37.58 percent in 1996 with an average of 59.96 percent. The domestic credit to private sector is highest i.e. 75.3 percent in 2016while lowest 22.51 percent is in 2002 with an average of 37.49 percent. Similarly, the highest total assets of commercial banks are found to be 76.7 percent in 2016 while lowest is 23.84 percent in 1995 with an average of 41.28 percent. The highest stock market capitalization is found to be 67.4 percent in 2016 while lowest is 4.18 percent in 1998 with an average of 16.84 percent. Likewise, the highest inflation rate is found to be 11.24 percent in 1998 while lowest is 2.58 percent in 2000 with an average of 7.11 percent. The highest government expenditure is found to be 22 percent in 2014 and lowest is 8.11 percent in 2001 with an average of 12.74. The highest trade openness is found to be 64.04 percent in 1997 while lowest is 41.85 percent in 2015 with an average of 49.92 percent.
The study shows that that the money supply and domestic credit to private sector have positive relationship with total capital formation. Similarly, total assets, stock market capitalization, inflation rate and government expenditure are also positively related to total capital formation. However, trade openness has negative relationship with the total capital formation. Likewise, the results show that money supply and domestic credit to private sector have positive relationship with the real gross domestic product growth. The result also shows that the total assets, stock market capitalization, inflation rate, government expenditure and trade openness are also positively related to real gross domestic product growth.
The regression results show that the beta coefficient for money supply, domestic credit to private sector, total assets, stock market capitalization, inflation rate, government expenditure have positive relationship with total capital formation. The result also revealed that the beta coefficient for trade openness is negative with total capital formation. Similarly, the beta coefficient for money supply, domestic credit to private sector, total assets, stock market capitalization, inflation rate, government expenditure and trade openness have positive relationship with real gross domestic product growth. The study has found that domestic credit to private sector, stock market capitalization and government expenditure are the most influencing variables for economic growth.
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Relationship between financial sector development and economic growth: a case of Nepal [printed text] / Binod Marasini, Author . - 2018 . - 97p. ; GRP/Thesis + 10/B. Languages : English | Descriptors: | Economic growth
| | Class number: | 338.9 | | Abstract: | Financial system is very important in the economic growth of the country. The financial system could be financial institutions, financial market, financial instrument and financial services. A good financial system could help in the efficient mobilization of capital and channelize it in proper way towards economic prosperity. A growing body of evidence suggests that financial institutions (such as banks and insurance companies) and financial markets (including stock markets, bond markets, and derivative markets) exert a powerful influence on economic development, poverty alleviation, and economic stability (Levine, 2005). Financial intermediaries constitute a potentially important mechanism for long run economic growth. Without the existence of financial intermediaries, investments might not take place. The financial intermediaries enable the more effective exchange of goods and services, mobilizes individual and corporate savings and in the efficient allocation of resources that monitors corporate managements (Levine, 1997). Economic growth is the crucial means of uplifting living standards as well as achieving economic development. Economic growth provides the means for the formation of growth-promoting financial intermediaries. The formation of financial intermediaries accelerates growth by enhancing the allocation of capital (Greenwood and Jovanovic, 1989).
The major objective of the study is to examine the relationship between financial sector development and economic growth of Nepal. This study is based on the secondary sources of data that are collected from economic survey through 1995/96 to 2015/16 leading to a total of 22 observations. The data were collected from Economic Survey published by Ministry of Finance and World Development Indicators of World Bank. The study has employed descriptive and causal comparative research designs in order to investigate the impact of financial sector development on the economic growth in Nepal.
The descriptive analysis shows the highest total capital formation is found to be 39.1percent in 2015 while lowest is 20.25 with an average of 28.22 percent. The highest real gross domestic product growth is noticed to be 6.20 percent in 2000 while lowest is 0.12 percent with an average of 4.22 percent. The highest money supply is found to be 99.8 percent in 2016 while lowest is 37.58 percent in 1996 with an average of 59.96 percent. The domestic credit to private sector is highest i.e. 75.3 percent in 2016while lowest 22.51 percent is in 2002 with an average of 37.49 percent. Similarly, the highest total assets of commercial banks are found to be 76.7 percent in 2016 while lowest is 23.84 percent in 1995 with an average of 41.28 percent. The highest stock market capitalization is found to be 67.4 percent in 2016 while lowest is 4.18 percent in 1998 with an average of 16.84 percent. Likewise, the highest inflation rate is found to be 11.24 percent in 1998 while lowest is 2.58 percent in 2000 with an average of 7.11 percent. The highest government expenditure is found to be 22 percent in 2014 and lowest is 8.11 percent in 2001 with an average of 12.74. The highest trade openness is found to be 64.04 percent in 1997 while lowest is 41.85 percent in 2015 with an average of 49.92 percent.
The study shows that that the money supply and domestic credit to private sector have positive relationship with total capital formation. Similarly, total assets, stock market capitalization, inflation rate and government expenditure are also positively related to total capital formation. However, trade openness has negative relationship with the total capital formation. Likewise, the results show that money supply and domestic credit to private sector have positive relationship with the real gross domestic product growth. The result also shows that the total assets, stock market capitalization, inflation rate, government expenditure and trade openness are also positively related to real gross domestic product growth.
The regression results show that the beta coefficient for money supply, domestic credit to private sector, total assets, stock market capitalization, inflation rate, government expenditure have positive relationship with total capital formation. The result also revealed that the beta coefficient for trade openness is negative with total capital formation. Similarly, the beta coefficient for money supply, domestic credit to private sector, total assets, stock market capitalization, inflation rate, government expenditure and trade openness have positive relationship with real gross domestic product growth. The study has found that domestic credit to private sector, stock market capitalization and government expenditure are the most influencing variables for economic growth.
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