ISSN No: 1608-6627
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Guidelines for Article Submission

Articles for Volume 15

Development of the Financial System and Its Impact on Poverty Alleviation in Nepal
[Dr. Meena Acharya]

The article reviews briefly the financial and monetary developments in Nepal since the mid-fifties both in developmental and poverty perspectives. Particularly, the role of the banking sector in rural financing and specific poverty targeted programs is reviewed in detail. Impact analysis is made on the basis of availability of data. The article concludes that, in spite of the tremendous growth of the financial sector in the post-liberalization period, its penetration in the rural areas has declined. There seem to be no backward or forward linkages of this financial development with the real sectors of the economy and, consequently, to poverty alleviation. Though government and non-government micro-financing institutions and also the cooperatives have grown fast in the 1990s, they are also concentrated in urban areas. The plethora of targeted credit programs has made very little dent in the rural credit market. More than 80 percent of the borrowing households have still to depend on non-formal sources for their credit needs. Majority of the targeted credit programs have been unable to directly cater to the needs of the bottom 20 percent households because the poor lack other resources and knowledge to benefit from the saving-credit programs. Lastly, inadequacy of financial and monetary data for evaluating the impact of financial development on the economy as well as on poverty is noted.

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Microfinance Against Poverty : The Nepalese Scenario
[Shalik Ram Sharma]

Microfinance institutions, both formal and informal, provide financial services which help in creating self-employment and income opportunities among the poor. NRB has made a number of innovative attempts for developing microfinance framework in the country. The article attempts to analyze the extent of the access provided, and the generation of employment opportunities, by the formal and semi-formal microfinance institutions/programs in addition to identifying the problems faced in attaining financial sustainability by them. In view of the increasing need for microfinance services in terms of both the amount and coverage, NRB needs to enhance its capabilities to regulate, supervise and monitor large number of MFIs and also come up with innovative and suitable credit policies/regulations that would create an enabling environment for MFIs to grow and attain sound financial health. Some of the desired roles for HMG are demonstrating firm commitment towards poverty alleviation through action, stopping direct involvement in running and managing MFIs, stopping owning MFIs, and handing over presently owned shares of such institutions to the private sector through appropriate and transparent mechanism.

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Applicability of Smeral's Model in Explaining Tourism Share of Member States in SAARC Region
[Dr. Shoorabeer Paudyal]

This paper attempts, with help of Smeral Model, to study the determinants of demand share of individual member states in total SAARC arrivals from seven major tourism markets. Empirical study of the tourism with the help of modified version of this model demonstrates the interdependency among the SAARC countries. This study found that relative price and regional share are two important link factors for the individual states in the region. Individual share of the tourism increases with an increase in regional share in the world tourism and with a decrease in relative price of tourism and vice-versa.

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Performance of Public Enterprises in Nepal
[Dr. Fatta Bahadur K.C.]

Public Enterprises (PEs) have been established in Nepal with multiple goals and responsibilities. Though PEs have assisted in developing the infrastructure and institutional base in the country, these enterprises have neither been functioning in an efficient manner nor been able to perform their assigned roles. Performance analysis, in terms of the financial, economic and social parameters, shows that the Nepalese PEs have not been successful in achieving the financial and economic objectives, and also in providing social benefits to the people at large. Excessive political interference, lack of adequate autonomy and accountability, absence of professionalism, rampant financial indiscipline and conflicting goals have been the main reasons responsible for the dismal performance of PEs in Nepal. However, their performance can be improved by allowing greater autonomy and more accountability by introducing reward and punishment system linked with performance, and by appointing the Chief Executive Officer (CEO) by merit basis. In the absence of such measures, these enterprises need to be either privatized or liquidated. Presently, PEs in Nepal are, no doubt, at the cross-roads. Any delay in implementing reforms (privatizing or liquidating or continuing to operate through restructuring) would be detrimental to the overall health of the national economy.

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Depreciation Systems in Nepal: A Comparison Based on ETR
[Dr. Puspa Raj Kandel]

The administrator after the introduction of Income Tax Act, 2002 has claimed that the depreciation rule under the new law is more generous than the depreciation rule of 1992 in case of all the assets including machinery and building. The analysis made on the basis of ETR, however, shows no decrease in ETRs in 2002 in comparison to 1992. That means, the depreciation rule of 2002 in case of building and machinery is not generous as claimed by the tax policy maker. In opposite of this, the analysis proves that the depreciation provisions of 1992 and 2002 are more liberal than the depreciation provisions of earlier periods.

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An Assessment of the Impact of External Debt on Economic Growth of Nepal
[Gunakar Bhatta]

Countries at early stages of development have small stocks of capital and require foreign borrowing for their investment needs and meet their external resource gap. Nepal's dependence on foreign assistance, nearly for the last five decades, can be viewed from the same perspective. The present article is a preliminary work in the direction of analyzing the relationship of external debt and economic growth of Nepal. The examination of debt burden indicators suggests the increasing burden of external debt, with a significant increase in the size and magnitude of such debt during 1990s. The empirical observation shows the external debt flow having positive effect on economic growth. This indicates that external debt should not be viewed only as a burden but also as a major source of financing for a developing economy like Nepal. However, the analysis of external debt stock and debt servicing shows that the equally important that external borrowing be made to supplement but not replace domestic savings in the long run.

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Money and Its Role of Income Stabilization: An Econometric Diagnosis
[Bamadev Paudel]

There is a continuous debate over the transmission mechanism of monetary impulses on economic activities in developed as well as developing countries, and the debate revolves around two broad categories of transmission channels- the Keynesian and the Quantity Theory. Keynesian transmission mechanism examines the effect of money on economic activities by building the structural model. The basic Keynesian view is that the impact of the change in money stock on real income results indirectly through change in the rate of interest rate and thereby investment expenditure. The Quantity Theory of Money, on the other hand, is associated with reduced-form economic model, in which the effect of money on economic activities is examined by looking whether movements in income are tightly linked to movements in money supply. Monetarists analyze the effect of change in money supply on the change in income level as if the economy is a black box in which its working can not be detected. This paper tries to find out the relationship between money and income by using reduced-form models. The empirical results show that there is a strong positive association between money and its role of income stabilization. It is true both for nominal as well as real terms. The lagged response of money supply on income is two years in nominal terms and three years in real terms. There is also the structural shift in the role of money for income stabilization, indicating that money has become more effective during the liberalization period to determine the income level of the economy.

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