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RELATIONSHIP BETWEEN INFLATION
AND ECONOMIC GROWTH
OF NEPAL
A Research
Submitted to Research Committee
Lumbini Banijya Campus
Butwal
By
MAYA ACHARYA
Lumbini Banijya Campus
Butwal
April, 2019
ii
ABSTRACTS
This research entitled Relationship between Inflation and Economic Growth of
Nepal has set twin objectives: 1) to analyze the trend of GDP, consumer’s price
index, money supply, foreign assistance and government expenditure and 2) to
investigate the relationship between GDP, consumer’s price index, money supply,
foreign assistance and government expenditure.
The research has used secondary data. Gross domestic product (GDP) is dependent
variable and others consumer’s price index, money supply, foreign assistance and
government expenditure are independent variables. Required data have been brought
from Quarterly Economic Bulletin, 2017 to be published by Nepal Rastra Bank
spanning from 1975 to 2015. Different statistical tools like average, percentage and
correlation analysis have been used to draw the conclusions.
Correlation test showed that there is a very strong and significant relationship of
consumer’s price index, money supply, government expenditure and foreign
assistance with gross domestic product. The relationship is positive supporting the
economic theories. The test also found a very strong, significant and positive
relationship of money supply, government expenditure and foreign assistance with
consumer’s price index. Similar relationship has been found of government
expenditure and foreign assistance with money supply. The relationship in between
government expenditure and foreign assistance is also very strong, significant and
positive.
This research is very useful to the researchers, professors, teachers, planners, policy
makers, students and all those who are interested in the field of the relationship
between gross domestic product, consumer’s price index, money supply, government
expenditure and foreign assistance. The research recommends to carry out frequent
research in the field in the days to come.
iii
TABLE OF CONTENTS
Title Page i
Abstracts ii
Table of Contents iii-iv
List of Tables v
List of Figures vi
Acronyms vii
CHAPTER-I: INTRODUCTION 1-3
1.1. General Background 1-2
1.2. Statement of Problem 2
1.3. Objectives of the Study 2
1.4. Hypothesis of the Study 2
1.5. Significance of the Study 2
1.6. Limitations of the Study 3
1.7. Organization of the Study 3
CHAPTER-II: REVIEW OF LITERATURE 4-8
2.1. Theoretical Review 4-5
2.1.1. Classical Theory 4
2.1.2. Keynesian Theory 4
2.1.3. Monetarism 4-5
2.2. Empirical Review 5-8
2.2.1. International Context 5-6
2.2.2. National Context 7-8
CHAPTER-III: RESERCH METHODOLODGY 9-12
3.1. Research Design 9
3.2. Nature and Source of Data 9
3.3. Processing and Organization of Data 9
3.4. Sample Period Covered 9
3.5. Model Specification 10
3.6. Variable Specification 10-11
iv
3.7. Tools and method of data analysis 11
3.8. Hypothesis Setting 11
CHAPTER-IV: TREND OF GDP, CONSUMER’S PRICEINDEX,
MONEYSUPPLY, FOREIGN ASSISTNCE
ANDGOVERNMENTEXPENDITURE
12-16
4.1. Trend of Gross Domestic Product (GDP) 12
4.2. Trend of Consumer’s Price Index 13
4.3. Trend of Money Supply 13-14
4.4. Trend of Government Expenditure 14-15
4.5. Trend of Foreign Assistance 15-16
CHAPTER-V: RELATIONSHIP BETWEEN GDP, CONSUMER’S
PRICEINDEX, MONEY SUPPLY, FOREIGN ASSISTANCE
ANDGOVERNMENT EXPENDITURE
17-21
CHAPTER-VI: SUMMARY, CONCLUSIONS AND
RECOMMENDATIONS
23-24
6.1. Summary 22-24
6.2. Conclusions 24-25
6.3. Recommendations 25
References
Index
v
LIST OF TABLES
Table No. Title Page No.
5.1. Summary of Correlation Test of GDP with CPI, M1, GE & FA 17
5.2 Summary of Correlation Test of CPI with M1, GE & FA 18
5.3. Summary of Correlation Test of M1 with GE & FA 19
5.4. Summary of Correlation Test of GE with FA 20
vi
LIST OF FIGURES
Figure No. Title Page No.
4.1. Percentage Change in Gross Domestic Product 13
4.2. Percentage Change in Consumer’s Price Index 14
4.3. Percentage Change in Money Supply (M1) 15
4.4. Percentage Change in Government Expenditure 16
4.5. Percentage Change in Foreign Assistance 17
vii
ACRONYMS
CBS – Central Bureau of Statistics
CPI – Consumer’s Price Index
FA – Foreign Assistance
GDP – Gross Domestic Product
GE – Government Expenditure
GNP – Gross National Product
MS – Money Supply
NP – Nonparametric
NRB – Nepal Rastra Bank
R & D – Research and Development
SGMM – Systematic Generalized Method of Moments
TAR – Threshold Autoregressive
1
CHAPTER-I
INTRODUCTION
1. General Background
The main objective of monetary policy is high and sustainable economic growth
accompanied with low level of inflation. High and persistent inflation and low economic
growth have been major characteristics of Nepalese economy. High inflation distorts the
optimal allocation of resources and retards growth (NRB, 2017).
Growth is an increase in the economy’s capacity to produce total volume of goods and
services during a particular time period. Mild inflation is considered to be desirable for
economic growth. Excess inflation detracts from sustainable economic growth and
development (NRB, 2007).
To achieve higher and sustainable economic growth is objective of all the countries but
the objective may not be fulfilled due to several factors affecting the economic growth.
One of influencing factors to economic growth is inflation. Inflation rate and economic
growth are macroeconomic policies in each country. All the countries make target to
higher economic growth and lower the inflation rate or to keep it constant.
Controversy is not merely limited to empirical results but there is also controversy in the
theoretical aspect. Structuralists view positive relationship whereas monetarists view
negative relation. Neo-classicists say that inflation helps in shifting income to higher
saving capitalists. Higher the saving higher, higher will be the investment and hence
economic growth. Likewise, Keynesians view that inflation helps in saving the income
which can be invested and therefore economic growth. But converse to this, Barrow says
that inflation reduces investment and therefore economic growth decreases.
Controversy has also existed regarding the causal relationship. Various empirical studies
have come with diverse results. Some have found unidirectional relationship either
running from inflation to economic growth or running from economic growth to inflation.
Some studies have arrived at the conclusion that there exists bi-directional relationship
2
running from inflation to economic growth and economic growth to inflation. Some even
have found no causal relationship in between them.
1.1. Statement of Problem
This study is deeply concerned with macroeconomic variables: inflation and economic
growth as there is no uniformity on theoretical and empirical aspects regarding the
relationship in between them. From theoretical views, inflation is positively influence
economic growth whereas it negatively influences economic growth (Fisher, 1993). From
empirical point of views, there is no uniformity regarding relationship between inflation
and economic growth. There is Negative relationship between inflation and economic
growth (Adhikari, 2014), (Baharumshah et al, 2016), (Huge, 2017). Positive relationship
(Mallik and Chowdhury, 2001), (Bhusal & Shilpakar, 2014), (Behara, 2014), (Mallik and
Chowdhury, 2001), Very high and very low level of inflation is undesirable for high
economic growth (Balcilar et al, 2017). Inflation is mainly determined by Indian inflation
with narrow money (NRB, 2007). Also has found unidirectional relation as well as
bidirectional relationship between inflation and economic growth.
Some studies found positive relation whereas some have found negative relation but
some have come with result no relation. In case of causality too, empirical results are not
same. Some have found unidirectional causal relationship and some have found bi-
directional relationship. Some studies even found no causal relationship. Therefore, this
study more interested to empirically analyze the relationship between the two variables.
Research question of the study is to analyze the degree of relationship between variables.
1.2. Objectives of the Study
i. To analyze the trend of GDP, consumer’s price index, money supply, foreign
assistance and government expenditure.
ii. To examine the degree of relationship between GDP, consumer’s price index,
money supply, foreign assistance and government expenditure.
1.3. Hypothesis of the Study
H0= Inflation is positively correlated with economic growth
H1= Inflation is negatively correlated with economic growth.
3
1.4. Significance of the Study
This study pragmatically investigates the relation between inflation and economic
growth. The results of the study add to body of the knowledge in the field of inflation and
growth. The study is helpful to government, planners and researchers in making policies.
1.5. Limitations of the Study
This study is limited to secondary data spanning from 1975 to 2015 published by NRB
and the findings of the study is generalized to Nepal only.
1.6. Organization of the Study
The whole study is divided into five chapters. The first chapter is introduction which
consists of general background, statement of problem, objectives of the study, hypothesis
of the study, significance of the study, limitations of the study and organization of the
study. Second chapter is review of literature which is further divided into two parts:
theoretical review and empirical review. The empirical review is also divided into two
parts comprising review in international context and national context. Third chapter is
methodology that includes research design; nature and sources of data; sample period
covered, organization and processing of data; tools and method of data collection; model
specification; variables specification; tools and method of data analysis; and hypothesis
testing. Variables specification includes: GDP, CPI, money supply, government
expenditure and foreign assistance. Hypothesis testing consists coefficient test and t-test
though correlation analysis. Fourth chapter will be trend of trend of GDP, consumer’s
price index, money supply, foreign assistance and government expenditure. Fifth chapter
is relationship between GDP and consumer’s price index, money supply, foreign
assistance and government expenditure. And the sixth chapter consists of major findings,
conclusions and recommendations.
4
CHAPTER-II
REVIEW OF LITERATURE
2.1. Theoretical Review
2.1.1. Classical Theory
Gokal and Hanif (2004), in their working paper “Relationship between Inflation and
Economic Growth in Fiji” have written that Adam Smith, pioneer of classical theory, has
developed production function as:
𝑄 = 𝑓 𝐿, 𝐾, 𝑆
Where L= labour, K= capital and S= land
So, growth on population, investment and land leads to the growth of output. Smith
argues that saving leads to investment which ultimately leads to growth. He also has
opined that profits do not fall due to diminishing marginal productivity but due to rise of
wages which happens because of competition among capitalists for labor demand. He has
not explicitly exhibited the relationship between inflation and growth but the negative
relationship is existed implicitly. Price rises cause to increase cost of production through
higher wages. Hence profit decreases which cause to decrease investment and growth.
2.1.2. Keynesian Theory
Ahuja (2011), in his book “Macroeconomics Theory and Policy”, has written that Keynes
argues that it the effective demand that determines the level of output and employment.
Effective demand is the point where aggregate demand and aggregate supply equalize
each other. In the short-run, aggregate demand curve is upward sloping. An increase in
aggregate demand as intersects with the aggregate supply curve, both price and output
increase. There is positive relationship between inflation and growth in the short-run.
2.1.3. Monetarism
Ahuja (2011), in his book “Macroeconomics Theory and Policy”, has described that
monetarist Milton Friedman developed neutrality theory of money. Friedman opines that
consumers’ expectation of price rise gives time them to make adjustment in the future.
So, as price increases, consumers’ wages also increase. Increased wages maintain the
5
increased price. Therefore there is no effect of inflation on growth. Economists have
termed this condition as neutrality of money.
2.2. Empirical Review
2.2.1. International Context
Kasidi and Mwakanemela (2013) examined the impact of inflation on economic growth
in Tanzania and found the existence of inflation-growth relationship. They have used
correlation coefficient and cointegration technique to establish the relationship between
inflation and GDP and coefficient of elasticity has been applied to measure the degree of
responsiveness of change in GDP to change in general price level with time series data
for the period 1990 to 2011. They concluded that there is no cointegration and long run
association between inflation and economic growth.
Behera (2014) has investigated the impact of inflation on economic growth in the six
South Asian countries. He has used the time series data for the period 1980 to 2012 using
Error Correction Model and Granger Causality Test. He found that there is high positive
correlation existence between inflation and economic growth for all the countries. The
cointegration test suggested that there is long run relationship existence for Malaysia and
no long run relationship between inflation and economic growth of the rest of the other
countries.
Liao et al (2015) tried to explore the long run effects of inflation in in the Euro area and
the US through a two country Schumpeterian growth model with cash-in-advance
constraints on consumption and R&D investment using cross country panel data to
estimate the effects of inflation on R&D. They found that increasing domestic inflation
reduces domestic R&D investment and the growth rate of domestic technology.
Baharumshah et al (2016) analyzed the relationship between inflation, inflation
uncertainty, and economic growth in a panel data of 94 emerging and developing
countries. It is based on the System Generalized Method of Moments (SGMM) that
controls for instrument proliferation. They concluded that first, when both the
proliferation of instruments problem and the biased standard error in SGMM are
accounted for, the results reveal that only in non-inflation crisis countries does inflation
6
harm growth, while inflation uncertainty promotes growth. Empirically they found that
the negative growth effect of high inflation rates and the growth enhancing effect of low
inflation. Second, the negative-level effect of not keeping inflation in check outweighs
the positive effect from uncertainty in non-inflation crisis countries in all three regimes.
Third, the existence of a positive effect of uncertainty about the inflation rate on growth
through a precautionary motive is confirmed when inflation reaches moderate ranges
(5.6–15.9%).
Balcilar et al (2017) have attempted to explore the existence of a threshold level of
inflation for the U.S. economy over 1801- 2013 using a combination of nonparametric
(NP) and instrumental variable semiparametric (SNP-IV) methods. They have concluded
that the relationship between growth and inflation is hump shaped –that higher levels of
inflation reduce growth more compared to low inflation or deflation. They also found that
high or very low levels of inflation are undesirable and are associated with lower growth
- hinting that a growth maximizing value of inflation exists.
Hung (2017) investigated the nonlinearity of inflation and economic growth: the role of
tax evasion using simple endogenous growth model with money in the utility function.
By endogenizing an agent's decision of tax evasion, he showed that the ratio of
government tax revenues over output is increasing in the tax rate for low levels of initial
tax rates. He found a nonlinear relationship between inflation and economic growth such
that a rise in the inflation rate for low levels of initial inflation may be associated with an
increase or a decrease in economic growth. He concluded that the negative relationship
between inflation and economic growth for higher levels of initial inflation is convex.
2.2.2. National Context
NRB (2007) has explored the inflation in Nepal with time series data from fiscal year
1975/76 to fiscal year 2005/2006 using ordinary least square method to run the
regressions of the general model. It covered short run equation for the inflation processes
in Nepal and to capture the inflation dynamics in the country, the long-run equation has
been developed through cointegration and error correction techniques. It concluded that
inflation in Nepal is mainly determined by Indian inflation with narrow money only
7
having an effect in the short run. It also attributed that the geographical situation of
having a shared open and contiguous border, which facilitates informal trade and goods
arbitrage, a rigid pegged exchange rate regime between both currencies along with time
varying capital mobility. The study has concluded that within the existing framework of
pegged exchange rate and capital mobility, the main influencing factor of inflation is
from India with the NRB having control over domestic inflation only in the short run but
limited control beyond that.
Bhusal and Silpakar (2011) studied growth and inflation to estimate threshold level of
inflation in Nepal. They have used Granger causality test by using annual data for the
period 1975 to 2010. They have concluded that positive and unidirectional relationship
between the inflation to economic growth. They also found that 6 percent threshold value
of inflation in Nepal and recommended that Nepal Rastra bank could apply expansionary
monetary policy for supporting economic growth till the inflation rate does not exceed
the threshold level.
Koirala (2012) investigated inflation persistence under Threshold Autoregressive (TAR)
model motivated by the fact that inflation in Nepal goes through different degrees of
persistence based on various regime shifts. He has used monthly time series of the
Consumer Price Index (CPI) from 1998:01 to 2011:12. The presence of dynamic
adjustment of inflation between high inflation and low inflation regimes defined by
threshold inflation reveals non-linear behavior of inflation. He concluded that a degree of
low persistency is found in the high inflation regime. Low inflation persistence in high
inflation regime signifies that inflation do not remain for a long period of time as a result
of policy shocks pursued to trigger inflation down.
Adhikari (2014) has examined whether inflation hampers economic growth in Nepal or
not with distributed lag models using the annual data of gross domestic product and
consumer price index. He found that the economic growth of Nepal at current time is
adversely affected by inflation at the same time, whereas the current economic growth is
favorably affected by the inflation of preceding time.
Ministry of Finance (2016) mentioned that the global production growth rate has declined
due to slow revival of world economy and decreased growth rate of large emerging
8
economies that contribute greatly to world economic growth rate. Of the economies of
large Asian countries, economies of India and China that had grown by 7.3 percent and
6.9 percent respectively in 2015 are projected to grow by 7.5 percent and 6.5 percent
respectively. The rise in price level of developed economies that stood at 1.4 percent in
2014 fell to 0.3 percent in 2015. This inflation rate recorded the lowest following the
financial crisis. The price level increase in developed economies in 2016 is projected at
0.7 percent. Fall in the oil prices is the reason behind the low price rise of developed
countries. Likewise, price of emerging and developing economies that remained at 4.7
percent in 2015 is projected to remain 4.5 percent in 2016. The increase in price level of
Euro Area is remained at zero percent in 2015 and it is expected to rise marginally by 0.4
percent in 2016. 1.9 Inflation in South Asian countries seem to be affected by the
economic incidences of other countries of the world. Inflation rate of all South Asian
countries decreased in 2015 as compared to that of 2014 as a consequence of decreased
prices of petroleum products and food commodities.
Nepal Rastra Bank (2017) has estimated the optimal inflation rate in Nepal based on the
data of the period 1978 to 2016 using ordinary least square method. It concluded that
there exists threshold effect of inflation and estimated the turning point of inflation to be
6.25 percent. It suggested that Nepal should adopt an inflation target range around the
computed optimal inflation rate to lower the inflation expectation and enhance economic
growth.
9
CHAPTER-III
RESERCH METHODOLODGY
3.1. Research Design
This study uses deductive method of analysis. It is based on both descriptive and
analytical. The variables of the study are GDP, CPI, government expenditure, money
supply and foreign assistance. GDP is regressand and whereas CPI, government
expenditure, money supply and foreign assistance are regressors. Data of related
variables are collected from NRB. Correlation method is employed to make the analysis.
3.2. Nature and Sources of Data
This study is based on the macroeconomic variables. Therefore, data are secondary in
nature and they are collected from “A Handbook of Government Finance Statistics -
2017” published by NRB.
3.3. Processing and Organization of Data
The collected data GDP, government expenditure, money supply and foreign assistance
are measured in Nepalese currency. They are expressed in Rs. million and CPI is
expressed in percentage.
3.4. Sample Period Covered
Data have sample period of 41 years spanning from 1975 to 2015.
3.5. Model Specification
To establish the functional relationship between dependent variable and explanatory
variables, Solow’s growth model is used. Solow’s growth model was appeared in the
“Quarterly Journal of Economics”-1956 under the title “A Contribution to the Theory of
Economic Growth” to analyze movement of economic system through change in capital-
labor ratio. The growth model is like this:
10
𝑄 = 𝑓 𝐿, 𝐾 ⋯⋯⋯⋯⋯⋯⋯⋯ 1
Where, Q= output, L= labour and K= capital. Now, on the basis of Solow’s growth
model, the functional relationship between GDP and its explanatory variables CPI,
government expenditure, money supply and foreign assistance is established as follows:
𝐺𝐷𝑃 = 𝑓 𝐶𝑃𝐼, 𝐺𝐸, , 𝑀𝑆, 𝐹𝐴 ⋯⋯⋯⋯⋯⋯⋯⋯ 2
Where GDP= gross domestic product,
CPI= consumer’s price index
GE= government expenditure
MA= money supply
FA= foreign assistance
3.6. Variable Specification
a) Gross Domestic Product (GDP)
Total money value of all the final goods and services calculated at current price and
produced in a particular geographical territory generally during a year is called GDP.
𝐺𝐷𝑃 = 𝑃𝑖𝑄𝑖
𝑛
𝑖=0
Where, 𝑃𝑖= price of ith
commodity
𝑄𝑖= quantity of ith
commodity
b) Consumer’s Price Index (CPI)
Index numbers are the statistical devices that measure relative change in the magnitude of
variables or a group of variables in two or more situations with respect to time,
geographical location, income, profession, employment, price, corruption etc. Index
numbers, in fact, are taken as barometer of the economy. They can be used to measure
the pressure of the economic activities like increasing or decreasing price, rising or
falling production, deficit or surplus trade and so on. CPI are unweighted and weighted.
Unweighted CPI is measured by Simple Aggregate of Price Method and Simple Average
of Price Relative Method. On the other hand, weighted CPI is measured by Weighted
Aggregate Indices and Weighted Average of Price Relative Index. Formula for
constructing Simple Aggregate of Price Method is P01 =𝛴𝑃1
𝛴𝑃0× 100
P01= . The price index for the current year with respect to the base year
11
𝛴𝑃1= aggregate prices of the selected goods in the current year
𝛴𝑃0= aggregate of prices of the selected goods in the base year
c) Government Expenditure Government expenditure is the spending of government that government makes on two
headings: regular or administrative expenditure and development or capital expenditure.
Government expenditure is made to create public utilities.
d) Foreign Assistance
Foreign assistance is also known as foreign aid which refers to the resources like money,
goods, machineries and manpower that is given or loaned by the government or
organizations or people in the rich countries to help people in poor countries.
e) Money Supply Money supply is defined as the total quantity of money that central monetary authority
brings in the economy during a certain time period. In this paper, money supply refers to
𝑀1.
𝑀1 = 𝑀0 + 𝑆𝑎𝑣𝑖𝑛𝑔 𝐷𝑒𝑝𝑜𝑠𝑖𝑡𝑠
Where, 𝑀0= notes and coins held by people in the in the economy plus other valuables
that can be immediately converted into cash.
3.7. Tools and method of data analysis
The tools are used in analysis of data t-test through correlation.
3.8. Hypothesis Setting a) Hypothesis setting for correlation
0 < 𝐵𝑖 ≤ 0.20, very weak association
0.20 < 𝐵𝑖 ≤ 0.40, weak association
0.40 < 𝐵𝑖 ≤ 0.60, moderate association
0.60 < 𝐵𝑖 ≤ .80, strong association
0.80 < 𝐵𝑖 ≤ 1, very strong association
Where, B = co-efficient and i = 1, 2, 3 and 4.
b) Hypothesis setting of t-Statistics
Significant hypothesis: 𝑡 > 2
Insignificant Hypothesis:𝑡 < 2
12
CHAPTER-IV
TREND OF GDP, CONSUMER’S PRICE INDEX,
MONEYSUPPLY, FOREIGNASSISTNCE AND
GOVERNMENTEXPENDITURE
4.1. Trend of Gross Domestic Product (GDP)
Table 4.1 put in Index-III shows the trend of gross domestic product from fiscal year
1975 to 2015. GDP is 166010 million rupees in the fiscal year 1975 and it has become
22554600 million rupees in the fiscal year 2015. Gross domestic product is 4586954
million rupees in average. Gross domestic product is below the average in 27 years from
1975 to 2001 whereas it is above the average in 14 years from 2002 to 2015. Gross
domestic product has been increasing since from beginning to ending but the percentage
change in it is not so. It is trending in so fluctuated way. How the percentage change in
gross domestic trending is shown in the figure 4.1.
Figure 4.1: Percentage Change in Gross Domestic Product
Source: Index- III
In the figure 4.1, trend of percentage change in gross domestic product has been depicted.
The trend is most ups and down in the fiscal years from 1975 to 1981. The ups and
downs are small in the years from 1981 to 2001 and the fluctuation is larger from 2001 to
2015.
-15
-10
-5
0
5
10
15
20
25
30
35
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
13
4.2. Trend of Consumer’s Price Index
Table 4.2 put in the Index-IV shows the trend of Consumer’s Price Index (CPI) from
fiscal year 1975 to 2015. CPI is 4.2 in the fiscal year 1975 and it has become 100 in the
fiscal year 2015. CPI is 31.59 in average. CPI is below the average in 23 years from 1975
to 1997 whereas it is above the average in 18 years from 1998 to 2015. CPI has decreased
in the year 1976 and it has been increasing from 1976 to 2015.Percentage change in CPI
is trending ahead in waved way. How the percentage change in CPI is trending is shown
in the figure 4.2.
Figure 4.2: Percentage Change in Consumer’s Price Index
Source: Index-IV
In the figure 4.2, trend of percentage change in consumer’s price index has been depicted.
The trend is like the wave.
4.3. Trend of Money Supply Table 4.3put in the Index-V shows the trend of money supply (M1) from fiscal year 1975
to 2015. M1 is 1337.7 million rupees in the fiscal year 1975 and it has become 424744.6
million rupees in the fiscal year 2015. M1 is 73145.29 in average. M1 is below the
average in 27 years from 1975 to 2001 whereas it is above the average in 14 years from
2002 to 2015. M1 has been increasing from beginning to ending. Percentage change in
CPI is trending ahead in fluctuation way. How the percentage change in M1 is trending is
shown in the figure 4.3.
-5
0
5
10
15
20
25
14
Figure 4.3: Percentage Change in Money Supply (M1)
Source: Index-V
In the figure 4.2, trend of percentage change in money supply (M1) has been depicted.
The trend is fluctuated.
4.4. Trend of Government Expenditure
Government expenditure is the spending of government that government makes on two
headings: regular or administrative expenditure and development or capital expenditure.
Government expenditure is made to create public utilities like construction of roadways,
ropeways, railways, waterways, electricity generation and expansion, establishment of
schools, colleges, universities, training centers, research centers, hospitals, health post,
health centers, clinics, radio, television, press, peace, security, defense and so on.
Table 4.4 put in Index-VI shows the trend of government expenditure from fiscal year
1975 to 2015. Government expenditure is 1513.8 million rupees in the fiscal year 1975
and it has become 531340 million rupees in the fiscal year 2015. It is 93505.1 million
rupees in average. It is below the average in 29 years from 1975 to 2004 whereas it is
above the average in 12 years from 2005 to 2015. It has been increasing from beginning
to ending. Percentage change in government expenditure is trending ahead in fluctuation
way. How the percentage change in government expenditure is trending is shown in the
figure 4.4.
-5
0
5
10
15
20
25
30
35
40
45
15
Figure 4.4: Percentage Change in Government Expenditure
Source: Index-VI
In the figure 4.4, trend of percentage change in government expenditure has been
depicted. The trend is most fluctuated.
4.5. Trend of Foreign Assistance
Foreign assistance is also known as foreign aid to be given by foreign countries the poor
countries. Nepal is developing country. Due to weak economic condition foreign aid is
needed to develop infrastructures as well as to invest in different sectors. Various
countries provide aids bilaterally and multilaterally. If donor countries give aid directly
that is called bilateral aid and if is supported by more donor countries and international
agencies, it is called multilateral aid.
Table 4.5 put in the Index-VII shows the trend of foreign assistance from fiscal year 1975
to 2015. Foreign assistance is 386.8 million rupees in the fiscal year 1975 and it has
become 125691.1 million rupees in the fiscal year 2015. It is 20175.1 million rupees in
average. It is below the average in 28 years from 1975 to 2003 whereas it is above the
average in 13 years from 2004 to 2015. It has been increasing from beginning to ending.
Percentage change in foreign is trending ahead in fluctuation way. How the percentage
change is trending is shown in the figure 4.5.
0
5
10
15
20
25
30
35
40
16
Figure 4.5: Percentage Change in Foreign Assistance
Source: Index-VII
In the figure 4.5, trend of percentage change in foreign assistance has been depicted. The
trend is fluctuated. Foreign assistance has increased surprisingly in the fiscal year 2015.
-40
-20
0
20
40
60
80
100
120
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
17
CHAPTER-V
RELATIONSHIP BETWEEN GDP, CONSUMER’S PRICE
INDEX, MONEY SUPPLY, FOREIGN ASSISTANCE AND
GOVERNMENT EXPENDITURE
This chapter is very important one as it investigates the relationship between the selected
variables. This study has chosen Gross Domestic Product (GDP) as the dependent
variable and the others like Consumer’s Price Index (CPI), Money Supply (M1),
Government Expenditure (GE) and Foreign Assistance (FA) as the independent variables.
Table 5.1: Summary of Correlation Test of GDP with CPI, M1, GE & FA
Variables Coefficients t-Statistics
Consumer’s Price Index (CPI) 0.976683 28.41064
Money Supply (M1) 0.993655 55.17444
Government Expenditure (GE) 0.996123 70.71192
Foreign Assistance (FA) 0.956707 20.52777
Source: Appendix-II
Table 5.1 shows the summary of correlation test. Coefficient of CPI is 0.976683 which
lies in the range of 0.80 to 1.00. Its meaning is that there is very strong association
between consumer’s price index and gross domestic product. Value of t-statistics is
28.41064 which is greater than 2.00. It means there is significant relationship between
consumer’s price index and gross domestic product. The positive sign of coefficient
establishes a positive relationship between two variables that is gross domestic product
increases as consumer’s price index increases and gross domestic product decreases as
consumer’s price index decreases. The positive relationship between consumer’s price
index and gross domestic product supports the Keynesian theory which says that
production increases with creeping inflation.
Coefficient of money supply (M1) is 0.993655 which lies in the class 0.80 to 1.00. Its
meaning is that there is very strong association between money supply and gross
domestic product. Value of t-statistics is 55.17444 which is greater than 2.00. It means
18
there is significant relationship between money supply and gross domestic product. The
positive sign of coefficient establishes a positive relationship between two variables that
is gross domestic product increases as money supply increases and gross domestic
product decreases as money supply decreases. The relationship between money supply
and gross domestic product has supported the theory.
Coefficient of government expenditure is 0.996123 which lies in the class 0.80 to 1.00.
Its meaning is that there is very strong association between government expenditure and
gross domestic product. Value of t-statistics is 70.71192 which is greater than 2.00. It
means there is significant relationship between government expenditure and gross
domestic product. The positive sign of coefficient establishes a positive relationship
between two variables that is gross domestic product increases as government
expenditure increases and gross domestic product decreases as government expenditure
decreases. The relationship between government expenditure and gross domestic product
has supported the theory.
Coefficient of foreign assistance is 0.956707 which lies in the range of 0.80 to 1.00. Its
meaning is that there is very strong association between foreign assistance and gross
domestic product. Value of t-statistics is 20.52777 which is greater than 2.00. It means
there is significant relationship between foreign assistance and gross domestic product.
The positive sign of coefficient establishes a positive relationship between two variables
that is gross domestic product increases as foreign assistance increases and gross
domestic product decreases as foreign assistance decreases. The relationship between
foreign assistance and gross domestic product has supported the theory.
Table 5.2: Summary of Correlation Test of CPI with M1, GE & FA
Variables Coefficients t-Statistics
Money Supply (M1) 0.965388 23.11520
Government Expenditure (GE) 0.957835 20.81896
Foreign Assistance (FA) 0.930107 15.81460
Source: Appendix-II
Table 5.2 shows the summary of the correlation of Consumer’s Price Index (CPI) with
Money Supply (M1), Government Expenditure (GE) and Foreign Assistance (FA). The
19
coefficient value of money supply is 0.965388 which lies in the class 0.80 to 1.00. It
means that there exists a very strong relationship of money supply with consumer’s price
index. The positive sign of the coefficient supports theory that is price increases as
quantity of money increases. Value of t-statistics is 23.11520 which is more than 2.00.
This t-statistics also shows the significant relationship between money supply and
consumer’s price index.
The coefficient value of government expenditure is 0.957835 which lies in the class 0.80
to 1.00. It means that there exists a very strong relationship of government expenditure
with consumer’s price index. The positive sign of the coefficient supports theory that is
price increases as government expenditure increases. Value of t-statistics is 20.81896
which is more than 2.00. This t-statistics also shows the significant relationship between
government expenditure and consumer’s price index.
The coefficient value of government expenditure is 0.957835 which lies in the class 0.80
to 1.00. It means that there exists a very strong relationship of government expenditure
with consumer’s price index. The positive sign of the coefficient supports theory that is
price increases as government expenditure increases. Value of t-statistics is 20.81896
which is more than 2.00. This t-statistics also shows the significant relationship between
government expenditure and consumer’s price index.
The coefficient value of foreign assistance is 0.930107 which lies in the class 0.80 to
1.00. It means that there exists a very strong relationship of foreign assistance with
consumer’s price index. The positive sign of the coefficient supports theory that is price
increases as foreign assistance increases. Value of t-statistics is 15.81460 which is more
than 2.00. This t-statistics also shows the significant relationship between foreign
assistance and consumer’s price index.
Table 5.3: Summary of Correlation Test of M1 with GE & FA
Variables Coefficients t-Statistics
Government Expenditure (GE) 0.992623 51.12710
Foreign Assistance (FA) 0.977452 28.90845
Source: Appendix-II
20
Table 5.3 is the summary of correlation test of money supply (M1) with government
expenditure (GE) and Foreign Assistance (FA). Coefficient value of government
expenditure is 0.992623 which lies in the range of 0.80 to 1.00. It indicates that there is
very strong relationship of government expenditure with money supply. Positive sign of
coefficient supports the economic theory that quantity of money increases in the economy
as government expenditure increases. Value of t-Statistics is 51.12710 which is greater
than 2.00. Value of t-Statistics also shows that there exists a significant association
between government expenditure and money supply.
Coefficient value of foreign assistance is 0.977452 which lies in the range of 0.80 to 1.00.
It indicates that there is very strong relationship of foreign assistance with money supply.
Positive sign of coefficient supports the economic theory that quantity of money
increases in the economy as foreign assistance increases. Value of t-Statistics is 28.90845
which is greater than 2.00. Value of t-Statistics also shows that there exists a significant
association between foreign assistance and money supply.
Table 5.4: Summary of Correlation Test of GE with FA
Variable Coefficient t-Statistics
Foreign Assistance (FA) 0.963629 22.51810
Source: Appendix-II
Table 5.4 is the summary of correlations test of Government Expenditure (GE) with
Foreign Assistance (FA). Coefficient of government expenditure is 0.963629 which lies
in the class of 0.80 to 1.0. Its meaning is that there is very strong relationship of
government expenditure with foreign assistance. The relationship supports economic
theory i.e. government expenditure increases as foreign assistance increases. Value of t-
statistics is 22.51810 which is greater than 2. This means t-Statistics also shows that there
is a significant association between government expenditure and foreign assistance.
Correlation test showed that there is a very strong and significant relationship of
consumer’s price index, money supply, government expenditure and foreign assistance
with gross domestic product. The relationship is positive supporting the economic
theories. The test also found a very strong, significant and positive relationship of money
supply, government expenditure and foreign assistance with consumer’s price index.
21
Similar relationship has been found of government expenditure and foreign assistance
with money supply. The relationship in between government expenditure and foreign
assistance is also very strong, significant and positive.
5.1. MAJOR FINDINGS
Trend analysis showed that GDP is 166010 million rupees in the fiscal year 1975 and it
has become 22554600 million rupees in the fiscal year 2015. Gross domestic product is
4586954 million rupees in average. Gross domestic product is below the average in 27
years from 1975 to 2001 whereas it is above the average in 14 years from 2002 to 2015.
Gross domestic product has been increasing since from beginning to ending but the
percentage change in it is not so. It is trending in so fluctuated way
Consumer’s price index (CPI) is 4.2 in the fiscal year 1975 and it has become 100 in the
fiscal year 2015. CPI is 31.59 in average. CPI is below the average in 23 years from 1975
to 1997 whereas it is above the average in 18 years from 1998 to 2015. CPI has decreased
in the year 1976 and it has been increasing from 1976 to 2015. Percentage change in CPI
is trending ahead in waved way.
Money supply (M1) is 1337.7 million rupees in the fiscal year 1975 and it has become
424744.6 million rupees in the fiscal year 2015. M1 is 73145.29 in average. M1 is below
the average in 27 years from 1975 to 2001 whereas it is above the average in 14 years
from 2002 to 2015. M1 has been increasing from beginning to ending. Percentage change
in CPI is trending ahead in fluctuation way.
Government expenditure is 1513.8 million rupees in the fiscal year 1975 and it has
become 531340 million rupees in the fiscal year 2015. It is 93505.1 million rupees in
average. It is below the average in 29 years from 1975 to 2004 whereas it is above the
average in 12 years from 2005 to 2015. It has been increasing from beginning to ending.
Percentage change in government expenditure is trending ahead in fluctuation way.
Foreign assistance is 386.8 million rupees in the fiscal year 1975 and it has become
125691.1 million rupees in the fiscal year 2015. It is 20175.1 million rupees in average. It
is below the average in 28 years from 1975 to 2003 whereas it is above the average in 13
22
years from 2004 to 2015. It has been increasing from beginning to ending. Percentage
change in foreign is trending ahead in fluctuation way. Foreign assistance has increased
surprisingly in the fiscal year 2015.
Correlation test showed that there is a very strong and significant relationship of
consumer’s price index, money supply, government expenditure and foreign assistance
with gross domestic product. The relationship is positive supporting the economic
theories. The test also found a very strong, significant and positive relationship of money
supply, government expenditure and foreign assistance with consumer’s price index.
Similar relationship has been found of government expenditure and foreign assistance
with money supply. The relationship in between government expenditure and foreign
assistance is also very strong, significant and positive.
23
CHAPTER-VI
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
6.1. Summary
Since inflation is one of the influential factors of economic growth, all the economists are
so interested at finding the relationship between economic growth and inflation.
According to several researches and studies, the relationship is not same. Some studies
have established positive relation whereas some have found negative or no relation.
Controversy is not merely limited to empirical results but also in the theoretical aspect.
Structuralists view positive relationship whereas monetarists view negative relation. Neo-
classicists say positive relationship. Likewise, Keynesians view that inflation helps in
saving the income which can be invested and therefore economic growth. But converse to
this, Barrow says that inflation reduces investment and therefore economic growth
decreases.
Review of literature found both positive and negative relationship between inflation and
economic growth. It found negative growth effect of high inflation rates and the growth
enhancing effect of low inflation.
This study is more interested to empirically see the relationship between the two
variables. Research question of the study is to analyze the relationship between variables.
The study has set twin objectives: 1 ) to analyze the trend of GDP, consumer’s price
index, money supply, foreign assistance and government expenditure and 2) to analyze
the relationship in between GDP and consumer’s price index, money supply, foreign
assistance and government expenditure
Trend analysis showed that all the variables: GDP, money supply, foreign assistance and
government expenditure except consumer’s price index are trending ahead in increasing
way. Consumer’s price index has fluctuated trend.
Correlation test showed that there is a very strong and significant relationship of
consumer’s price index, money supply, government expenditure and foreign assistance
with gross domestic product. The relationship is positive supporting the economic
theories.
24
6.2. Conclusions
This study has selected variables gross domestic product, consumer’s price index, money
supply, government expenditure and foreign assistance. The dependent variable is gross
domestic product and others are independent. What kind of relationship exists between
GDP, consumer’s price index, money supply, foreign assistance and government
expenditure? This is the research questions set by the study. To analyze the trend and
degree of the relationship between the variables are twin objectives of the study.
According to the trend analysis, GDP, money supply, foreign assistance and government
expenditure are trending ahead in increasing way but consumer’s price index has
fluctuated trend. Correlation test showed that there is a very strong and significant
relationship of the chosen variables supporting economic theories.
6.3. Recommendations
The most concerning aspect of the study is the analysis of the relationship between
consumer’s price index and gross domestic product. Correlation test found a positive,
significant and very strong association between the two variables. The positive
relationship of consumer’s price index with gross domestic product means that GDP
increases as price level increases and GDP decreases as price level decreases. The
relationship has supported the Keynesian theory. Some small increment in the price level
that is creeping inflation brings profit to the producers and they are encouraged to invest
more and hence productivity goes to be high resulting economic growth. So, it is
recommended to the concern authorities that economy can entertain small increment in
price level for economic growth. This is also recommended that economic growth and
prosperity are possible through increased government expenditure, foreign assistance and
money supply.
25
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Balcilar, M., Gupta, R., & Jooste, C. (2017). The growth-inflation nexus for the US from
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pp 105-120.
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Chu, A. C., Cozzi, G., Lai, C. C., & Liao, C. H. (2015). Inflation, R&D and growth in an
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Hung, F. S. (2017). Explaining the nonlinearity of inflation and economic growth: The
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27
Index-I
Money Supply (M1), Government Expenditure (GE), Foreign Assistance (FA), Gross Domestic
Product (GDP) in Rs millions and Consumer Price Index (CPI), from 1975 to 2015
Source: Nepal Rastra Bank, Quarterly Economic Bulletin, 2017
Year M1 CPI GE FA GDP
1975 1337.7 4.2 1513.8 386.8 166010
1976 1452.5 4.1 1913.4 505.7 173940
1977 1852.9 4.3 2330.4 556.9 172803
1978 2060.6 4.7 2674.9 848.4 197270
1979 2504.9 4.9 3020.5 996.4 261280
1980 2830.4 5.4 3470.7 1340.5 233510
1981 3207.8 6.1 4092.3 1562.2 273070
1982 3611.5 6.7 5361.3 1723.2 309880
1983 4348.9 7.7 6979.2 2075.9 338210
1984 4931.5 8.2 7437.3 2547.5 392900
1985 5480 8.5 8394.8 2678.3 465870
1986 7029.3 9.8 9797.1 3674 557343
1987 8120.2 11.2 11513.2 3990.9 638645
1988 9596.6 12.4 14105 5892.6 769061
1989 11775.4 13.4 18005 7347 892696
1990 14223 14.7 19669.3 7935 1034158
1991 16283.6 16.1 23549.8 8460.7 1203703
1992 19457.7 19.5 26418.2 10714.2 1494871
1993 23833 21.2 30897.7 11557.2 1714739
1994 28510.4 23.1 33597.4 11249.4 1992720
1995 32985.4 24.9 39060 14289 2191750
1996 36498 26.9 46542.4 15031.9 2489130
1997 38460.3 29.1 50723.76 16457.1 2805130
1998 45163.8 31.5 56118.3 16189 3008450
1999 51062.5 35.1 59579 17523.9 3420360
2000 60979.7 36.3 66272.5 18797.5 3794880
2001 70577 37.2 79835.1 14384.8 4415185
2002 77156.2 38.3 80072.2 15885.6 4594426
2003 83754.1 40.1 84006.1 18912.4 4922308
2004 93973.7 41.7 89442.6 23657.3 5367491
2005 100205.8 43.6 102560.5 22041.8 5894117
2006 114388.8 47.1 110889.2 25854.3 6540841
2007 113060.8 49.8 133604.6 29300.6 7278270
2008 126888.6 53.2 161349.9 36351.7 8156582
2009 154343.9 59.9 219661.9 49769.4 9882702
2010 196459.3 65.6 259689.1 57997.8 11927740
2011 218159.3 71.9 295363.4 51893.4 13669530
2012 222351.4 77.8 339167.5 47198.9 15273440
2013 263705.7 85.5 358638.3 60204.6 16950110
2014 301590.2 93.3 435052.3 63705.6 19645400
2015 424744.6 100 531340 125691.1 22554600
28
Index-II
Result of Correlation Test
Covariance Analysis: Ordinary
Date: 06/13/18 Time: 05:04
Sample: 1975 2015
Included observations: 41
Correlation
t-Statistic
Probability GDP CPI M1 GE FA
GDP 1.000000
-----
-----
CPI 0.976683 1.000000
28.41064 -----
0.0000 -----
M1 0.993655 0.965388 1.000000
55.17444 23.11520 -----
0.0000 0.0000 -----
GE 0.996123 0.957835 0.992623 1.000000
70.71192 20.81896 51.12710 -----
0.0000 0.0000 0.0000 -----
FA 0.956707 0.930107 0.977452 0.963629 1.000000
20.52777 15.81460 28.90845 22.51810 -----
0.0000 0.0000 0.0000 0.0000 -----
29
Index-III
Table 4.1: Trend of Gross Domestic Product Year Gross Domestic Product (GDP) % Change in GDP
1975 166010
1976 173940 4.77
1977 172803 -0.65
1978 197270 14.15
1979 261280 32.44
1980 233510 -10.62
1981 273070 16.94
1982 309880 13.48
1983 338210 9.14
1984 392900 16.17
1985 465870 18.57
1986 557343 19.63
1987 638645 14.58
1988 769061 20.42
1989 892696 16.07
1990 1034158 15.84
1991 1203703 16.39
1992 1494871 24.18
1993 1714739 14.70
1994 1992720 16.21
1995 2191750 9.98
1996 2489130 13.56
1997 2805130 12.69
1998 3008450 7.24
1999 3420360 13.69
2000 3794880 10.94
2001 4415185 16.34
2002 4594426 4.05
2003 4922308 7.13
2004 5367491 9.04
2005 5894117 9.81
2006 6540841 10.97
2007 7278270 11.27
2008 8156582 12.06
2009 9882702 21.16
2010 11927740 20.69
2011 13669530 14.60
2012 15273440 11.73
2013 16950110 10.97
2014 19645400 15.90
2015 22554600 14.80
Average 4586954
Source: Nepal Rstra Bank, Quarterly Economic Bulletin, 2017
30
Index-IV
Table 4.2: Trend of Consumer’s Price Index
Year CPI % change in CPI
1975 4.2
1976 4.1 -2.38
1977 4.3 4.87
1978 4.7 9.30
1979 4.9 4.25
1980 5.4 10.20
1981 6.1 12.96
1982 6.7 9.83
1983 7.7 14.92
1984 8.2 6.49
1985 8.5 3.65
1986 9.8 15.29
1987 11.2 14.28
1988 12.4 10.71
1989 13.4 8.06
1990 14.7 9.70
1991 16.1 9.52
1992 19.5 21.11
1993 21.2 8.71
1994 23.1 8.96
1995 24.9 7.79
1996 26.9 8.03
1997 29.1 8.17
1998 31.5 8.24
1999 35.1 11.42
2000 36.3 3.41
2001 37.2 2.47
2002 38.3 2.95
2003 40.1 4.69
2004 41.7 3.99
2005 43.6 4.55
2006 47.1 8.02
2007 49.8 5.73
2008 53.2 6.82
2009 59.9 12.59
2010 65.6 9.515
2011 71.9 9.60
2012 77.8 8.20
2013 85.5 9.89
2014 93.3 9.12
2015 100.0 7.18
Average 31.59
Source: Nepal Rastra Bank, Quarterly Economic Bulletin, 2017
31
Index-V
Table 4.3: Trend of Money Supply Year Money Supply (M1) % Change in M1
1975 1337.7
1976 1452.5 8.58
1977 1852.9 27.56
1978 2060.6 11.20
1979 2504.9 21.56
1980 2830.4 12.99
1981 3207.8 13.33
1982 3611.5 12.58
1983 4348.9 20.41
1984 4931.5 13.39
1985 5480.0 11.12
1986 7029.3 28.27
1987 8120.2 15.51
1988 9596.6 18.18
1989 11775.4 22.70
1990 14223.0 20.78
1991 16283.6 14.48
1992 19457.7 19.49
1993 23833.0 22.48
1994 28510.4 19.62
1995 32985.4 15.69
1996 36498.0 10.64
1997 38460.3 5.37
1998 45163.8 17.42
1999 51062.5 13.06
2000 60979.7 19.42
2001 70577.0 15.73
2002 77156.2 9.32
2003 83754.1 8.55
2004 93973.7 12.20
2005 100205.8 6.63
2006 114388.8 14.15
2007 113060.8 -1.16
2008 126888.6 12.23
2009 154343.9 21.63
2010 196459.3 27.28
2011 218159.3 11.04
2012 222351.4 1.92
2013 263705.7 18.59
2014 301590.2 14.36
2015 424744.6 40.83
Average 73145.29
Source: Nepal Rastra Bank, Quarterly Economic Bulletin, 2017
32
Index-VI
Table 4.4: Trend of Government Expenditure Year Government Expenditure % Change in Government Expenditure
1975 1513.8
1976 1913.4 26.39
1977 2330.4 21.79
1978 2674.9 14.78
1979 3020.5 12.92
1980 3470.7 14.90
1981 4092.3 17.90
1982 5361.3 31.00
1983 6979.2 30.17
1984 7437.3 6.56
1985 8394.8 12.87
1986 9797.1 16.70
1987 11513.2 17.51
1988 14105.0 22.51
1989 18005.0 27.64
1990 19669.3 9.24
1991 23549.8 19.72
1992 26418.2 12.18
1993 30897.7 16.95
1994 33597.4 8.73
1995 39060.0 16.25
1996 46542.4 19.15
1997 50723.7 8.98
1998 56118.3 10.63
1999 59579.0 6.16
2000 66272.5 11.23
2001 79835.1 20.46
2002 80072.2 0.29
2003 84006.1 4.91
2004 89442.6 6.47
2005 102560.5 14.66
2006 110889.2 8.12
2007 133604.6 20.48
2008 161349.9 20.76
2009 219661.9 36.14
2010 259689.1 18.22
2011 295363.4 13.73
2012 339167.5 14.83
2013 358638.3 5.74
2014 435052.3 21.30
2015 531340.0 22.13
Average 93505.1
Source: Nepal Rastra Bank, Quarterly Economic Bulletin, 2017
33
Index-VII
Table 4.5: Trend of Foreign Assistance Year Foreign Assistance % Change in Foreign Assistance
1975 386.8
1976 505.7 30.73
1977 556.9 10.12
1978 848.4 52.34
1979 996.4 17.44
1980 1340.5 34.53
1981 1562.2 16.53
1982 1723.2 10.30
1983 2075.9 20.46
1984 2547.5 22.71
1985 2678.3 5.13
1986 3674.0 37.17
1987 3990.9 8.62
1988 5892.6 47.65
1989 7347.0 24.68
1990 7935.0 8.00
1991 8460.7 6.62
1992 10714.2 26.63
1993 11557.2 7.86
1994 11249.4 -2.66
1995 14289.0 27.02
1996 15031.9 5.19
1997 16457.1 9.48
1998 16189.0 -1.62
1999 17523.9 8.24
2000 18797.5 7.26
2001 14384.8 -23.47
2002 15885.6 10.43
2003 18912.4 19.05
2004 23657.3 25.08
2005 22041.8 -6.82
2006 25854.3 17.29
2007 29300.6 13.32
2008 36351.7 24.06
2009 49769.4 36.91
2010 57997.8 16.53
2011 51893.4 -10.52
2012 47198.9 -9.04
2013 60204.6 27.55
2014 63705.6 5.81
2015 125691.1 97.29
Average 20175.1
Source: Nepal Rastra Bank, Quarterly Economic Bulletin, 2017