Executive Summary A healthy financial system is important for the growth process of an economy. It affects growth by influencing the saving, investment and technological innovations. In fact, researchers argue that low-income countries like Nepal need a much more robust and active financial system when compared to the developed world. Therefore, this study examines the relationship between financial development and economic growth using annual time series data for Nepal during the period 1984–2014. Because Nepal has a bank-based economy, the study used credit issued by banking and financial institutions to the private sector as the proxy for financial development. The economic growth has been measured using real gross domestic product (GDP) growth and real GDP per capita growth (constant 2005 US$). The autoregressive distributed lag (ARDL) bounds testing approach is used to investigate the cointegration among variables in the presence of structural breaks. The study used Zivot and Andrews’ (ZA) unit root test in order to find the structural breaks in the variables. The study finds that the structural change in private credit took place in 2007 when the government of Nepal and Maoists (the then rebels) signed a Comprehensive Peace Agreement and the Maoist rebels joined the interim government, which formally ended the 10 years long civil war in Nepal. Similarly, the study observes break points in real GDP growth and per capita growth in 2001 when the Royal Massacre and a state of emergency took place in Nepal. After allowing for structural breaks, the study finds evidence of a cointegration relationship between financial development and economic growth when economic growth is used as the dependent variable. Thus, it can be argued that the long-run causality is unidirectional from financial development to economic growth in Nepal. The estimates of the ARDL approach suggest that financial development has a significant positive impact on economic growth in both long run and short run. However, the estimates show that gross domestic saving, a control variable, has a negative impact on economic growth in Nepal. It clearly indicates that Nepal has long not been able to utilize the savings in the productive sector. The political instability, poor investment policies and securities and hence the lack of foreign investment and lack of technological innovations could be the causes for Nepal not benefiting from the country’s savings. It is also found that trade openness has a negative relationship with economic growth in the long run: possibly the cause of the persistent trade deficit of Nepal with the rest of the world. However, in the short run, the result shows a positive relationship between trade openness and growth. In fact, it is found that the magnitude of the positive impact of trade openness in the short run is higher than the magnitude of its negative impact in the long run. Thus, the policymakers should give more emphasis on trade and investment policies that could reduce the prolonged trade deficit and help the nation in getting long-term benefits from international trade.

This study examines the factors affecting the share price of Nepalese non-life insurance companies. This study is based on secondary data of 15 non-life insurance companies with 105 observations for the period from the fiscal year 2011/12 to 2017/18. The result shows that firm size is positively related to market price of share and price earnings ratio. It indicates that larger firm size leads to increase in market price of share and price earnings ratio. However, the study shows that inflation is negatively related to market price of share and price earnings ratio. The study also shows that dividend per share and return on assets are negatively related to the market price of share and price earnings ratio. Similarly, earnings per share have negative relationship with market price of share and price earnings ratio. The study concludes that the increase in return on assets and earnings per shares do not explain the variation in stock price in Nepalese non-life insurance companies. Nepal is one of the emerging economy; the determinants identified will provide knowledge to the potential investors about the key factors affecting share prices in the country and accordingly assist them in optimizing their investment strategy. The knowledge of the factors and their possible impact on share prices is highly appreciable as it would help investors make wise investment decisions and enable firms to enhance their market value.

This study examines the determinants of foreign trade in Nepal. Exports and imports of Nepal are the dependent variables. The selected independent variables are GDP of Nepal, GDP of trading partners, real effective exchange rate, distance, regional economic integration, per capita GDP of Nepal, per capital GDP of trading partners, economic freedom of Nepal and economic freedom of trading partners. The study is based on secondary data of 21 trading partners of Nepal with 210 observations for the period of 2010 to 2019. The data are collected from the Direction of Trade Statistics (DOTS) dataset of International Monetary Fund (IMF), World Development Indicator database of World Bank, CEPII gravity data set and the Heritage Foundation. The regression models are estimated to test the impact of various variables on the exports and imports of Nepal. The study showed that GDP of Nepal has a positive impact on exports of Nepal. It indicates that increase in GDP of Nepal leads to increase in exports of Nepal. Similarly, GDP of trading partners has a positive impact on exports. It indicates that increase in GDP of trading partners leads to increase in exports of Nepal. Likewise, distance has a negative impact on exports. It indicates that greater the distance with the trading countries, lower would be the exports of Nepal to those trading partners. Moreover, real effective exchange rate has a positive impact on exports. It indicates that increase in real effective exchange rate leads to increase in exports. In addition, SAFTA membership has a positive impact on exports. It indicates that SAFTA membership leads to increase in exports of Nepal. Furthermore, the study revealed that economic freedom index of trading partners has a positive impact on exports. It indicatesthat increase in economic freedom in dex of trading partners leads to increase in exports of Nepal. In addition, the study shows that GDP of Nepal has a positive impact on imports of Nepal. It indicates that increase in GDP of Nepal leads to increase in imports of Nepal.Similarly, GDP of trading partners has a positive impact on imports. It indicates that increase in GDP of trading partners leads to increase in imports of Nepal. Likewise, distance has a negative impact on imports. It indicates that greater the distance with the trading countries, lower would be the imports of Nepal from those trading partners. Similarly, real effectiveexchange rate has a positive impact on imports. It indicates that increase in real effective exchange rate leads to increase in imports. The study also reveals that GDP per capita differential has a positive impact on imports. It indicates that higher the GDP per capita differential, higher would be the imports of Nepal.