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All Journal Jurnal STIE Semarang (Edisi Elektronik) Performance : Jurnal Bisnis dan Akuntansi
Gnawali, Achyut
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Economics, Econometrics & Finance Education

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DYNAMIC EFFECTS OF CHANGE IN GOVERNMENT EXPENDITURE IN THE NEPALESE ECONOMY Adhikari, Gyan Mani; Gnawali, Achyut; Joshi, Binod; Chhetri, Santosh; Karki, Krishna Bahadur
JURNAL STIE SEMARANG Vol 17 No 1 (2025): Jurnal STIE Semarang
Publisher : Sekolah Tinggi Ilmu Ekonomi Semarang

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.33747/stiesmg.v17i1.799

Abstract

One of the central tenets of macroeconomics is that fiscal policy can effectively stabilize the economy and achieve macroeconomic targets. In the last few decades, monetary policy tools have been widely used to achieve this goal. There has been, however, a renewed interest in using fiscal policy as a stabilizing tool since the onset of the recent Global Financial Crisis. This study analyses the effects of changes in government expenditure on aggregate economic activity and how these effects are transmitted in the case of Nepal for the period 1990–2023. To analyze the transmission mechanism of government spending innovations, the Vector Autoregressive Model (VAR) is estimated for the following five variables: government expenditure, real GDP, private consumption, debt-to-GDP ratio, interest rate, and real exchange rate. The consumption and output respond negatively to the innovation in government expenditure, consistent with the standard neoclassical model. The interest rates increase in the face of expansionary fiscal spending. As government debt, builds up with fiscal expansion, the rising risk of default or increasing inflation risk reinforces crowding out through interest rates. The real exchange rate tends to appreciate in response to a rise in government spending. This finding is based on open economy literature and conventional literature.
MONETARY EXPANSION AND ECONOMIC GROWTH IN NEPAL: A VECM APPROACH Mani Adhikari, Gyan; Gnawali, Achyut; Joshi, Binod
PERFORMANCE: Jurnal Bisnis & Akuntansi Vol 15 No 1 (2025): Performance: Jurnal Bisnis & Akuntansi
Publisher : Fakultas Ekonomi dan Bisnis, Universitas Wiraraja Madura

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.24929/feb.v15i1.4188

Abstract

Modeling the relationship between money supply and national output has been one of the main controversial issues of interest for economists, researchers, and policymakers, over the past few years.. Economies worldwide aim to achieve a high output growth rate and stability in the general price level. There are debates between Keynesian and monetarists about the relationship direction between money supply and output. Monetarists argue that changes in the amount of money lead to unexpected changes in nominal income because of money stability. In contrast, Friedman assumes that it is the most stable function. The paper aims to analyze the process of money supply determination in Nepal and to analyze the short-run and long-run relation between money supply and economic growth in Nepal, using time series data, spanning from 1975 to 2023. The econometric model used in this study has been developed based on the quantity theory of money model, but the model is modified to accommodate other independent variables that influence economic growth. The study reveals that the money multiplier in Nepal is constant and also affected by the cash reserve ratio, indicating that the monetary policy variables can influence the money supply in the case of Nepal. Engle-Granger cointegration results reveal that there exists a long-run relationship between real GDP with broad money supply (M2) and narrow money supply (M1) at a 1 percent level of significance and with gross fixed capital formation (GFCF) at a 5 percent level of significance, but the results show that there is no any long-run relationship between real GDP and government capital expenditure. The VCEM results show that NGDP as a dependent variable was observed to be statistically significant with broad money supply (M2), at a 10 percent level of significance, implying the existence of long-run causality was observed from broad money supply to real GDP.
Co-Authors Adhikari, Gyan Mani Chhetri, Santosh Joshi, Binod Karki, Krishna Bahadur Mani Adhikari, Gyan