Reliability of industrial policies in Nepal: An empirical investigation into the role of macroeconomic indicators
-
DOIhttp://dx.doi.org/10.21511/ppm.22(1).2024.31
-
Article InfoVolume 22 2024, Issue #1, pp. 377-389
- 316 Views
-
71 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
This study aims to analyze the reliability of Nepal’s industrial policies, focusing on the effects of macroeconomic variables on implementation and outcomes. This paper assesses Nepal’s industrial policies, emphasizing the need for improvements, export promotion, and human capital development while recognizing the importance of strategic planning and context-specific approaches for economic growth, stability, and development. The analytical and descriptive approaches have been applied to analyze the data by collecting secondary data sources that include official publications, which encompass 47 time series variables from 1974 to 2020. The findings provide mixed evidence for the economic impacts of liberalization, with exports and liberalization driving overall GDP growth. In contrast, other factors like economic openness, tourism, and their relationship with industrial GDP remain statistically insignificant. The paper indicates that remittances and investment have the most substantial impact on GDP, raising it by 1.86 and 1.21 units per unit increase, respectively. Exports have a moderate impact on industrial GDP (0.403 units). Export-oriented industries and tourism lack significant associations with either type of GDP. Liberalization significantly boosted both GDP and industrial GDP, with an increase of 179465.3 and 49595.62 units, respectively. Imports also jumped post-liberalization, driven by higher remittances as 1.215 units per unit increase. This study on industrial policies in developing economies, focusing on Nepal, adds valuable insights. The findings can ensure policymaking, boost economic growth, and strengthen Nepal’s industrial sector.
- Keywords
-
JEL Classification (Paper profile tab)C36, L14, O33, P35
-
References37
-
Tables12
-
Figures3
-
- Figure 1. Normality test of model 1
- Figure 2. Normality test of model 3
- Figure 3. Normality test of model 4
-
- Table 1. Regression model
- Table 2. Heteroskedasticity in economic regression
- Table 3. Breusch-Godfrey Serial correlation LM test
- Table 4. Multicollinearity of VIF
- Table 5. Variance inflation factors
- Table 6. Heteroskedasticity for residuals
- Table 7. Godfrey serial correlation LM test for residuals
- Table 8. Determination of R2
- Table 9. Regression of model IV
- Table 10. Serial correlation test
- Table 11. Heteroskedasticity or homoscedasticity check
- Table 12. Least squares method for industrial GDP
-
- Abebaw, A. (2019). The effect of macroeconomic variables on industry sector output growth of Ethiopia. International Journal of Business and Economics Research, 8(6), 325-338.
- Altenburg, T. (2011). Industrial policies in developing countries: Overview and lessons from seven countries cases. Bonn: German Development Institute.
- Bjorvatn, K., & Coniglio, N. D. (2007). On the importance of openness for industrial policy design in developing countries (Discussion Paper No. 3/2007). Norwegian School of Economics and Business Administration.
- Emmanuel, M. T., Phocenah, N., & McCullough, K. (2023). The impact of working capital and macroeconomic variables on the profitability of listed industrial firms in South Africa. International Journal of Economics and Financial Issues, 13(5), 32-42.
- Evenett, S. J. (2004). The cross-border mergers and acquisitions wave of the late 1990s. In R. E. Baldwin & L. Winters (Eds.), Challenges to globalization: Analyzing the economics (pp. 411-470). University of Chicago Press.
- Government of Nepal. (2022). Industrial Statistics Policy 2021/22. Kathmandu: Ministry of Industry, Commerce & Supplies and Swiss Development Cooperation. (In Nepalese).
- Hamid, M. A., & Saleh, L. Y. (2022). Analysis of the effectiveness of some macroeconomic variables on the industrial sector in Iraq for the period (2004–2020). Tikrit Journal of Administrative and Economic Sciences, 18(58, 1), 250-269.
- Haque, I. (2007). Rethinking industrial policy (Discussion Paper No. 183). Geneva: United Nations Conference on Trade and Development.
- Hayashi, T., Basu-Das, S., Khadka, M. S., Isono, I., Keola, S., & Tsubota, K. (2020). Economic impact analysis of improved connectivity in Nepal. Asian Development Bank.
- Humphrey, J., & Schmitz, H. (2002). How does insertion in global value chains affect upgrading in industrial clusters? Regional Studies, 36(9), 1017-1027.
- Karas, M. (2022). The hazard model for European SMEs: Combining accounting and macroeconomic variables. Journal of Competitiveness, 14(3), 76-92.
- Kharel, K. R., & Chalise, D. R. (2021). A comparative study of contribution of FDI and domestic industrial investment in Nepalese economy. TRANS Asian Journal of Marketing & Management Research (TAJMMR), 10(1), 4-17.
- Khatri, M. B. (2018). Industrial development in Nepal: Problems and prospects. Economic Journal of Nepal, 41(3-4), 25-40.
- Kniivilä, M. (2007). Industrial development and economic growth: Implications for poverty reduction and income inequality. Helsinki, Finland: Pellervo Economic Research Institute.
- Lambe, I., Orbunde, B., Tion, W., & Haruna, D. (2022). Moderating role of managerial ownership on the effect of cash conversion cycle and receivable to payable ratio on firm performance in listed industrial and consumer goods companies in Nigeria. International Journal of Research and Innovation in Social Science, 6(11), 868-880.
- Lawson, J., Du, K., & Bentum-Micah, G. (2019). The impact of macroeconomic variables, investment incentives and government agreements on FDI inflows in Ghana. Journal of Economics and Business, 2(3), 1039-1056.
- Ministry of Finance. (2023). Economic Survey 2022/23. Kathmandu: Government of Nepal.
- Momoh, A. O., & Abdulminiru, J. (2021). The role of macroeconomic policies on savings mobilization in Nigeria. Journal of Economics and Sustainable Development, 12(4), 12-19.
- Nepal Rastra Bank. (2022). Quarterly Economic Bulletin 2022 (July). Economic Research Department, Kathmandu: Nepal Rastra Bank.
- Olarinde, M. O., & Yahaya, Z. A. (2018). African growth convergence: Role of institutions and macroeconomic policies. International Journal of Development Issues, 17(3), 346-371.
- Pack, H., & Saggi, K. (2006). The case for industrial policy: A critical survey (Policy Research Working Paper). World Bank.
- Panta, H., Devkota, M. L., & Banjade, D. (2022). Exports and imports-led growth: Evidence from a small developing economy. Journal of Risk and Financial Management, 15(1), 11.
- Panthi, R. (2019). Performance of public enterprises and its management challenges in Nepal. South Asian Journal of Marketing & Management Research, 9(4), 8-34.
- Pradhan, R. P., Arvin, M. B., Nair, M., Bennett, S. E., & Bahmani, S. (2020). Some determinants and mechanics of economic growth in middle-income countries: The role of ICT infrastructure development, taxation and other macroeconomic variables. The Singapore Economic Review.
- Regmi, G. P. (1994). Industrial growth in Nepal: A sectoral & regional analysis. New Delhi: Oxford & IBH Publishing Co. Pvt. Ltd.
- Rodrik, D. (2009). Industrial policy: Don’t ask why, ask how. Middle East Development Journal, 1(1), 1-29.
- Shapiro, H. (2007). Industrial policy and growth (DESA Working Paper No. 53 ST/ESA/2007/DWP/53).
- Sharma, D. P. (2009). Trade and industry of Nepal during the Rana Period. Kathmandu: Ratna Pustak Bhandar.
- Shrestha, P. K. (2010). Structural changes and economic growth in Nepal. New York: New School for Social Research.
- Soltani, S., Falihi, N., Mehrabiyan, A., & Amiri, H. (2021). Investigating the effects of monetary and financial shocks on the key macroeconomic variables, focusing on the intermediary role of banks using DSGE models. Journal of Money and Economy, 16(4), 477-500.
- Te Velde, D. W., Abdel-Latif, A., Altenburg, T., Cali, M., Ellis, K., Lin, J. Y., Schmitz, H., & Sen, K. (2010). Effective state-business relations, industrial policy and economic growth. London: ODI Publications.
- Upadhyaya, Y. M., Kharel, K. R., & Kharel, S. (2023). Exploring the relationship between trade openness and economic growth in Nepal: Insights from ARDL bound test cointegration analysis. Problems and Perspective in Management, 21(3), 792-805.
- Upadhyaya, Y. M., Kharel, K. R., Kharel, S., & Lamichhane, B. D. (2023). Exploring the nexus between economic growth and economic performance in Nepal. Investment Management and Financial Innovations, 20(4), 311-323.
- Waiswa, D. (2023). Role of macroeconomic indicators in Uganda’s food price inflation: A VECM approach. Equinox Journal of Economics Business and Political Studies, 10(2), 111-127.
- Yazdani, M., & Daryani, E. (2021). Output loss from sudden stop of FDI and the role of macroeconomic policies. Journal of Money and Economy, 16(2), 213-236.
- Yülek, M., & Akkemik, K. A. (2023). 20. Stages of industrial development and appropriate industrial policy. In P. Bianchi, S. Labory, & P. Tomlinson (Eds.), Handbook of Industrial Development (pp. 338-356). Cheltenham, UK: Edward Elgar Publishing.
- Zhuang, Y., Yang, S., Chupradit, S., Nawaz, M. A., Xiong, R., & Koksal, C. (2021). A nexus between macroeconomic dynamics and trade openness: Moderating role of institutional quality. Business Process Management Journal, 27(6), 1703-1719.