Suman Kharel

The capacity of foreign trade to substantially raise GDP via increased exports, heightened competition, and enhanced efficiency holds the key to bolstering economic growth and prosperity. Recognizing this transformation underscores the importance of shaping Nepal’s economic policies and development strategies for achieving lasting sustainable growth. The objective of this study is to investigate how trade openness has affected Nepal’s economic growth, given its importance in the nation’s overall development. By analyzing the correlation between trade openness and economic expansion, policymakers and researchers can uncover the role of international trade in driving Nepal’s economic advancement. The research methodology involves constructing a regression model using the Autoregressive Distributed Lag bound test, with variables analyzed in growth form and subjected to the Augmented Dickey-Fuller and residual tests. The study’s results indicate a strong positive relationship between trade openness and economic growth in Nepal from 1975 to 2020, with a long-term equilibrium observed. Short-term deviations from equilibrium are quickly corrected at 38.23% annually, highlighting the importance of balanced export and import growth for economic development. The study concludes that trade openness drives Nepal’s economic growth for sustainable development and environmental protection. It offers valuable insights for policymakers and stakeholders to enhance economic growth and overall development of the country.

This study aims to explore the relationship between economic growth and performance in Nepal, identifying key drivers for growth. Studying the nexus between economic growth and economic performance in Nepal is crucial for understanding how these factors interact within the nation’s specific context. Growth of gross domestic product (GDP) is represented as the primary indicator for evaluating economic performance, reflecting the overall well-being of a nation's economy. Economic performance encompasses a broader spectrum, including indicators such as employment rate, inflation, income distribution and overall economic stability. Using E-Views 10, a descriptive and analytical research approach has been applied to analyze time series secondary data from 1990–2021 using an econometric model. This study found that faster-growing economies typically experience increased jobs, higher investment, more exports, and often lower inflation. These relationships are part of a long-run equilibrium relationship. In the event of an economic shock disrupting this equilibrium, the economy tends to naturally return to the equilibrium over time. This study found that short-term causality running from lagged GDP, gross capital formation (GCF), exports, human development index (HDI), and employment ratio influence immediate GDP growth. These variables wield a short-term influence over GDP growth; for instance, a sudden surge in exports can prompt a temporary boost in economic growth. This indicates that there is a long-term sustained link between GDP growth and the independent variables rather than merely a short-term event.