ISSN No: 1608-6627
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Articles for Volume 14

A Comparative Review of Financial Services Sector Commitments in the Selected SAARC Member Countries: Relevant Experiences for Nepal's Accession to WTO
[International Finance Division, Reseach Department, Nepal Rastra Bank ]

The world economy is integrating at an ever faster pace which can be reflected in both growing global trade and the increasing number of the World Trade Organization (WTO) members. To capture the benefits and advantages of global trade, Nepal has commenced the accession process for membership into WTO and is presently negotiating commitments in the various sectors of goods and services. As one of those sectors, the financial services sector (FSS), has major influence on domestic monetary and financial stability, the present paper examines the appropriate levels of commitments in FSS for Nepal through a comparative review of the FSS commitments by selected SAARC member countries; namely India, Pakistan and Sri Lanka. The analysis indicates that the majority of the financial services sector commitments occur through commercial presence although there exists large country- specific variations. The paper ends by recommending the appropriate level of financial services sector commitments for Nepal and suggesting on the essential preparation required in FSS with WTO membership.

View full article A Comparative Review of Financial Services Sector Commitments in the Selected SAARC Member Countries: Relevant Experiences for Nepal's Accession to WTO
Investing in Shares of Commercial Banks in Nepal: An Assessment of Return and Risk Elements
[Narayan Prasad Paudel]

An attempt has been made in this paper to determine whether the shares of commercial banks in Nepal are correctly priced and to trace their future price movements when striving towards equilibrium. For this, some theoretical models have been discussed to analyze return and risk characteristics of those shares. The correlation coefficients between the returns on individual shares and the return on market portfolio have been analyzed with the objective of decomposing the total risk into systematic and unsystematic components. The analysis of the individual stock's beta coefficient helps determine the minimum rate of return required by the investor to compensate for systematic risk. Statistical results suggest that the analyzed shares here are not in equilibrium with most of the shares being less risky than the market. While all the shares examined appear to be attractive to the potential investors since they produce higher rates of return than that of the average stock, the various shares have different degrees of risk with some shares being unable to generate the minimum rate of return (i.e. the sum of risk free-rate plus a premium for additional risk bearing).

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Nepalese Health Policies: Some Observations from An Economic Development Perspective
[Shiva Raj Adhikari, Nephil Matangi Maskay, Ph.D. and Bishnu Prasad Sharma]

There is a strong positive relationship between health of the people and sustained economic development of a nation. Given its importance for sustained economic development, the Nepalese health policies are examined through the perspective of the various development plans which suggests that enunciation of clear health objectives have only recently occurred starting from the fifth development plan. However, this contrasts with the empirical observations which suggest that Nepalese public health expenditure over the last decade has had limited direct impact on the health sector outcomes; this observation for Nepal is based on analysis from an input-output model, examination of extension of health facility and through results of an indicative regression. The paper ends with some policy recommendations to Nepalese health policies, based on the empirical analysis, to facilitate the nations health to play its important role in economic development.

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An Econometric Analysis of the Impact of Real Effective Exchange Rate on Economic Activities in Nepal
[Nara Bahadur Thapa]

This paper tests the relationship between REER and GDP on the Nepalese economy. In the literature, two channels of transmission exist for the real exchange rate to affect economic activities; these are the aggregate demand channel and the aggregate supply channel. The traditional view has it that the real exchange rate operates through the aggregate demand channel. This means that the depreciation of the real exchange rate enhances the international competitiveness of domestic goods, boosts net exports and eventually enlarges GDP. The aggregate supply channel, on the other hand, purports that the depreciation of the real exchange rate increases the cost of production and helps redistribute income in favour of the rich. These two effects lower aggregate demand causing economic contraction. The empirical study shows that the traditional view holds for Nepal and implies that Nepal should at least keep the real exchange rate constant.

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Appendix 1
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Appendix 2
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