What the study found
Domestic credit, used here as a proxy for financial development, was found to have a favorable long-run effect on Nepal's GDP. Capital formation and exports were also linked to economic growth, while population growth was not.
Why the authors say this matters
The authors conclude that financial development, capital formation, and exports are crucial for Nepalese economic growth. They suggest that policies should increase capital investment, encourage export growth, and reduce barriers to financial development to support sustainable growth in Nepal.
What the researchers tested
The study examined how financial development, domestic credit, capital formation, exports, and population growth relate to economic growth in Nepal. It used secondary data from 1992 to 2023, the Cobb-Douglas production function framework, and an autoregressive distributed lag (ARDL) bounds testing approach to assess long-term relationships and short-term dynamics.
What worked and what didn't
Domestic credit had a favorable effect on GDP in the long run, but not in the short run. Capital formation and exports influenced economic growth in both the short and long term. Population growth did not affect economic growth in either time period, and about 41 percent of deviations from long-term equilibrium were corrected annually.
What to keep in mind
The abstract does not describe limitations beyond the study's Nepal-only focus and the 1992-2023 time period. The summary also does not provide details on data sources, model diagnostics, or possible alternative explanations.
Key points
- Domestic credit, as a proxy for financial development, had a favorable long-run effect on Nepal's GDP.
- Capital formation and exports were associated with economic growth in both the short and long term.
- Population growth did not affect economic growth in either time period.
- About 41 percent of deviations from long-term equilibrium were corrected annually.
- The authors suggest policies that boost capital investment, exports, and access to financial development.
Disclosure
- Research title:
- Domestic credit supports Nepal’s long-run economic growth
- Authors:
- Yadav Mani Upadhyaya, Shiva Raj Ghimire, Prem Bahadur Budhathoki
- Institutions:
- Tribhuvan University
- Publication date:
- 2026-03-06
- OpenAlex record:
- View
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