Relevancy of Harrod-Domar Model in Nepalese Economy
Journal Title: IOSR Journal of Economics and Finance (IOSR-JEF) - Year 2018, Vol 9, Issue 1
Abstract
Present paper aims at examining the relevance of Harrod-Domar model in Nepal through econometric techniques by using the data sets of saving, capital formation/capital output ratio and economic growth over the period 1974/75-2016/17. The variables, under study are found to be cointegrated, and there appears uni-directional causality running from saving to economic growth; and economic growth is found to be caused also by incremental capital output ratio as indicated by Granger causality test. The auto regressive distributed lag models report that economic growth of Nepal during the study period is affected positively by growth rate of saving; and incremental capital output ratio has the negative effect on economic growth, signifying the relevance of Harrod-Domar model in the economy of Nepal. This study plays crucial role in policy perspective that Government of Nepal should create the environment as to lead saving to increase, and saving should be converted into the capital formation through the development of capital market. Additionally, the capital substitution policy is indispensable to formulate through development of skilled labor force.
Authors and Affiliations
Rajendra Adhikari Ph. D.
Keywords
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- EP ID EP414517
- DOI 10.9790/5933-090103744.
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