The effect of remittances on the Nepali economy: A structural VAR study

Crawford School of Public Policy
Photo by Samrat Khadka on Unsplash

Event details

PhD Seminar (Econ)

Date & time

Friday 01 April 2022


Weston Theatre , Crawford School of Public Policy, No 132, Lennox Crossing, The ANU


Sudyumna Dahal

Hybrid event - Zoom link via registration

Despite the massive inflow of remittances during the turn of the century, the quantitative impact of remittances on the Nepali economy remains largely unexplored. The paper aims to fill this gap by examining the effects of remittance and other macroeconomic shocks on the small open economy of Nepal using novel quarterly GDP data. Employing a SVAR model, the paper finds that remittances had an overwhelming influence on the macro-economic aggregates of Nepal during the study period (2004-2019). While the remittance shock significantly increased money supply, price and appreciated the real exchange rate, the impact on output is not significant. Remittances to Nepal are largely driven by external factors but the increase in domestic prices and real exchange rate depreciation positively affects remittance inflows.

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