Globalization and Economic Growth in Nepal A VECM Approach

Abstract

This study explores globalization's political, social, and economic aspects and its impact on Nepal's economic growth between 1990 and 2020. The study employed sophisticated econometric techniques, first utilizing the Johansen Cointegration and VECM to assess causality among the variables under investigation and the Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) tests to confirm the presence of unit root problems. The ADF and PP test findings showed that every variable is integrated at first difference. One cointegrating vector was found by the Johansen Cointegration test, indicating a significant long run association among the variables. The study discovered a one-way causality between economic growth and political and economic globalization in the short-run analysis. On the other hand, over time, there is a two-way causality between Nepal's economic growth and political and economic globalization while a one-way causal relationship exists between social globalization and economic growth. These results recommended that Nepal's economic growth immediately impacts how it integrates into the global economy in several sectors. Economic and political globalization influences and is influenced by Nepal's economic growth in the short term, indicating a reciprocal link. The study found that there is need for a balanced approach to globalization that fosters economic growth while reducing its negative repercussions. It also stresses how crucial it is for Nepal to actively participate in the political and economic spheres of the world.