ISSN No: 1608-6627
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Articles for Volume 26-1

The Economic Cost of General Strikes in Nepal
[Min Bahadur Shrestha, Ph.D. Shashi Kant Chaudhary ]

This paper reviews the key aspects of general strikes and analyses the economic cost of such strikes in Nepal. Data analysis shows that average direct cost of general strikes stood at NRs. 1.8 billion per strike day and NRs. 27 billion per year at current prices during 2008-2013. The lost output per year accounted for 1.4 percent of the annual gross output. The total accumulated output loss due to general strikes in the five-year period amounted to NRs. 117 billion. With such losses, general strikes decelerated annual GDP growth rates in a range between 0.6 percentage point and 2.2 percentage points during the study period. The impact of general strikes was quick and significant on inflation and tourist arrival rates. The monthly inflation rate jumped to over 9 percent as a result of two-day general strike while the strike called for three or more days led to an inflation of more than 10 percent. Similarly, tourist arrival declined over a lag. However, gross fixed capital formation and foreign direct investment appeared to be less affected by general strikes, which might be due mainly to their bottomed out levels.

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Foreign Trade Pattern of Nepal: Gravity Model Approach
[Laxmi Prasad Prasai]

This study examines the overall trade pattern and flow of trade of Nepal by using pooled ordinary least square (OLS) along with one-year lag gross domestic product (GDP). It has also attempted to find the structural shift in the economy after economic liberalization in Nepal. In this study, gravity model is applied with comprehensive panel dataset for 29 years time period covering Nepals 94 trading partners. The results appear robust to specification, time period and trade determinants. Following a convention in this field, this study separates exports and imports instead of using total trade turnover. The empirical results are found consistent with the fundamental of gravity model as the study reveals positive coefficients for economic size and negative coefficients for distance. No significant structural break is found in the determinants of trade after economic liberalization. The results from simulation while comparing actual trade with predicted trade show that Nepals trade is not distorted by political decisions such as economical sanctions imposed by other countries. The results also suggest that trade with India in comparison to China is quite substantial. The results suggest that Nepal needs trade diversification in general and trade agreement with China in particular to reap the benefits from the trade.

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Indo-Nepal Trade Relation: The Phenomenon of Black Hole Effect
[Mahesh K. Chaulagai, Ph.D.]

In the field of international trade, an economy is assumed to be reeling under the 'BLACK HOLE EFFECT' originating from another economy, if all the major variables of international trade, irrespective of in which country they belong to, solely act in the favor of the latter economy. The results based on the models suggest that all the economic variables used in the study, whether Nepalese or Indian, show more favor to Indian economy compared to Nepalese economy confirming that Nepal has been spiraling into the 'BLACK HOLE EFFECT' originated from the Indian economy. Such an effect tends to be an everlasting phenomenon until and unless a substantially enough counterbalancing force is applied to nullify it. The 'BLACK HOLE EFFECT' explains why Nepal has not been able to reap the benefit in trade with India that would have come from the 'locomotive effect' of the robust growth of the Indian economy.

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Modelling and Forecasting Demand for Nepali Tourism
[Shoora B. Paudyal, Ph.D.]

In this paper international demand for Nepali tourism from the selected major markets has been estimated using time series data of number of tourist arrivals, per capita income, own price and prices of related goods. Autoregressive distributive lagged (ARDL) models are applied as a tool of estimation. This study confirms that tourism demand for Nepal is the composite function of disposable income, own price, cross price, lags of these variables, word of mouth of the visitors and qualitative factors captured by dummies. The most important policy implication can be derived from the words of mouth of the visitors. This manifests that only the good impression on the visitors can generates better words of mounth in favour of destination which underscores the up-gradation of the tourist products for the better image of the destination. The best performed models are used for forecasting the growth rates of tourist arrivals from the eight major markets for 2010 to 2020. The forecasted growth rates of tourist arrivals from major eight market are found very close to the actual average annual growth rates for 2006 to 2010.

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Managers Views on Dividend Policy of Nepalese Enterprises
[Nabaraj Adhikari, Ph.D.]

This paper analyses the perceptions of managers on dividend policy by surveying the views of 125 Managers of 66 companies listed at Nepal Stock Exchange. This survey is motivated by the observation that much of dividend policy theory is implicitly based on a capital market perspective. Out of 66 listed enterprises surveyed, 16 were from banks and 50 were from non-banks. To examine whether views of managers on dividend policy differ between banking group and non-banking group, chi-square analysis was used. Spearmans rank correlation coefficient was calculated to find out the degree of relationship between the responses of banking group and non-banking group and it was tested for significance at 5 percent level of significance. Median value of responses for each statement of observation on dividend policy was computed to highlight the significance of observation. The results of this study indicate that the most important determinants of dividend policy in order are growth rate of enterprises earnings, patterns of past dividends, availability of investment opportunities; managers have more emphasis on the stable dividend policy; and dividend policy influences the value of the enterprise in Nepal. The findings of the study could be useful for research scholars, and users of financial information including corporate managers, investors, financial analysts, and regulators. The current study extends limited previous research based on questionnaire and survey related dividend policy. It thus provides new evidence from a pre-emerging capital market of Nepal.

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