I had written a paper on Nepalese Economy in South Asia. I guess we can discuss something about economics rather than clinging to the same old politics. The major findings were:

Nepal is among the poorest countries with a GDP per capita ( current prices) of just US $246 in 2005


Nepal is a subsistence economy with more than 80% involved in agriculture

Agriculture contributes 40% to total GDP while industry and services account for 20% and 40 % respectively


Nepal has a current account surplus for the past 5 years; however, it has a deficit in its trade balance.

GDP growth rate in Nepal is among the lowest in the region with just 3.8% over the past 5 years while Pakistan enjoyed a growth of approximately 30% during the same period

Inflation rates are higher in the region with Nepal having a rise in inflation rate from 2.4% in 2001 to 3.8% in the year 2005.

Rate of increase in consumption has gone down with the inception of Maoists problem in 1996.
Nepal recorded a higher growth in public consumption than in private consumption between 1996/97 and 2002/03.

Instability, insecurity, lack of skilled labor, lack of infrastructure and lack of technology are among the major reasons for poor performance of Nepal.

If you want to read in detail, visit: http://dreamnepal.wordpress.com

.. I did a research on the topic "Impact of the Maoist led Civil Rebellion in the Economy of Nepal".

The economy of Nepal was measured in terms of Nepalese GDP, and the factors that could affect the Nepalese GDP were Maoist led war (WAR), democracy (DEM), physical capital available (CAP), open trade policy (OPEN), the U.S. GDP since it is a major export destination for Nepalese products (USA), and index of political and civil freedom of expression in Nepal (FREE).

My results that I obtained are as follows:

1. The t-test showed that all the variables, except DEM, were significant. [ Means, the economic development so far in Nepal is not determined by democracy being available or not].

2. A 1% increase in physical capital lowers the Nepali GDP by Rs. 23 per person.[One would actually expect the GDP to increase when there is more capital available to invest. But then again, the capital doesn't get invested and goes into the pockets of politicians].

3. When Nepal experiences increased freedom in civil liberties, the Nepali GDP lowers by Rs. 162 per person. [ This could be the result of increased corruption when there's increased freedom].

4. When Nepal opens itself in trade and starts trading heavily and relaxing its trade barriers, a 1% increase in trade causes Rs. 1435 increase per person in the Nepali GDP.

5. During years of the Maoist insurgency, Nepali GDP rose by Rs. 205 per person.[This does not mean the Maoist insurgency is helpful to increase the GDP. This number is simply a statistical value that my study calculated.]

The R-squared value for this regression was 0.98 which means the variables chosen in my regression were able to explain 98 percent of the movement in the Nepali GDP. Also, the Durbin Watson for my study was 1.93. A Durbin Watson value close to 2.0 tells us that the variables worked fine with each other and did not have any overlaps.

I know most of you will not agree to the above results. And it is sensible. But, this study only tells the numbers and facts based on the chosen variables. There may be other critical variables that I did not include in my study.

. I did a research on the topic "Impact of the Maoist led Civil Rebellion in the Economy of Nepal".

The economy of Nepal was measured in terms of Nepalese GDP, and the factors that could affect the Nepalese GDP were Maoist led war (WAR), democracy (DEM), physical capital available (CAP), open trade policy (OPEN), the U.S. GDP since it is a major export destination for Nepalese products (USA), and index of political and civil freedom of expression in Nepal (FREE).

My results that I obtained are as follows:

1. The t-test showed that all the variables, except DEM, were significant. [ Means, the economic development so far in Nepal is not determined by democracy being available or not].

2. A 1% increase in physical capital lowers the Nepali GDP by Rs. 23 per person.[One would actually expect the GDP to increase when there is more capital available to invest. But then again, the capital doesn't get invested and goes into the pockets of politicians].

3. When Nepal experiences increased freedom in civil liberties, the Nepali GDP lowers by Rs. 162 per person. [ This could be the result of increased corruption when there's increased freedom].

4. When Nepal opens itself in trade and starts trading heavily and relaxing its trade barriers, a 1% increase in trade causes Rs. 1435 increase per person in the Nepali GDP.

5. During years of the Maoist insurgency, Nepali GDP rose by Rs. 205 per person.[This does not mean the Maoist insurgency is helpful to increase the GDP. This number is simply a statistical value that my study calculated.]

The R-squared value for this regression was 0.98 which means the variables chosen in my regression were able to explain 98 percent of the movement in the Nepali GDP. Also, the Durbin Watson for my study was 1.93. A Durbin Watson value close to 2.0 tells us that the variables worked fine with each other and did not have any overlaps.

I know most of you will not agree to the above results. And it is sensible. But, this study only tells the numbers and facts based on the chosen variables. There may be other critical variables that I did not include in my study.

mickthesick ,
From what you have said, I guess you used OLS right? Important missing variables: Inflation, human capital, pop growth + a couple others.
I don't know why you included US GDP and how it became significant. How much is the trade worth anyway?
How did you get your variables WAR and DEM? Are these dummy variables? What was the range of data?

The unexpected results might be the consequences of omitted variables and incorrect use of functional form. If you used OLS, it might again be another problem.
Anyway, a good topic for a paper..

By the way, did you do this project for a class?

mickthesick ,
From what you have said, I guess you used OLS right? Important missing variables: Inflation, human capital, pop growth + a couple others.
I don't know why you included US GDP and how it became significant. How much is the trade worth anyway?
How did you get your variables WAR and DEM? Are these dummy variables? What was the range of data?

The unexpected results might be the consequences of omitted variables and incorrect use of functional form. If you used OLS, it might again be another problem.
Anyway, a good topic for a paper..

By the way, did you do this project for a class?

Its nice to know about our own country. I will read bibas's article in his blog :)

but just a quick comment on mickthesick's point no.2

You have mentioned physical capital. When it says 'physical', I would assume that money has already been invested in some physical assets.(?)

With more machinery available per person, GDP is supposed to increase. But then again , when have our machinery been allowed to operate without disruption? I remember a big explosion in Colgate Palmolive or was it Nepal Lever?

To address bibas's query about relevance of US GDP, it may not be a bad idea. After all, US GDP is a sign of consumer spending in US. The more US consumers spend, the more we can expect our garments to reach US ports (provided other factors like quota system havent changed and more preference have not been given to some African countries).

mahisasur,
I still do not get the variable US GDP. What I meant was, how much of our trade is with US? By the way, India accounts for most of our trade-more than 50%. So, why not account for Indian GDP rather than US GDP?
Here is a piece of info which might help my argument:

Total exports increased by 4.5 percent, as was the case last year, to Rs. 44.0 billion. Exports to India increased by 15.6 percent to Rs. 25.8 billion in contrast to the decline of 8.6 percent last year. Exports to other countries, which had gone up by 24.7 percent last year, declined by 8.0 percent to Rs. 18.2 billion. The exports of woollen carpets, tanned skin and jewellery to other countries increased while that of the readymade garments and Pashmina declined. Total imports increased by 9.5 percent to Rs. 112.3 billion compared to the rise of 16.7 percent last year. Imports from India increased by 11.8 percent compared to the rise of 28.1 percent last year, while imports from other countries went up by 6.7 percent as against the lower growth 4.6 percent last year.

If we look at the figures, US has much lower share. So, I do not think it was a good choice to include US GDP and not Indian GDP.
source: NRB macroeconomic situation

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bibas100,

You are right. I was just trying to defend mick's decision of inculding another country's GDP there. Looking at the figures, perhaps India's GDP would be more relevant. Or even both US and India as US is a major economy upon which so many countries including India and China depend.
Letting the research period be known to us ,eg. 2055-2060, would have made it more meaningful. Nevertheless, must be an interesting paper in it entirety.

.Here we go again guys.

As to Bibas's inquiry about why I used the U.S. GDP, the reason why I used US GDP was becuse Nepal exports huge amounts of products to the U.S. But we all know that India is Nepal's biggest exporting destination. But then we also know that most of the trade done with India doesn't have official statistics and data which I could use in my study. So I had to go with the second most popular exporting destination: the U.S. Also, I ran my regression excluding the U.S. GDP and my Durbin Watson fell from 1.93 to 0.73, which means it was actually a "valuable" statistical data, not in the sense that it itself explains the movement in Nepali GDP, but in the sense that it works "well" with the other variables of my data. I am confident that the GDP of India works better than the US GDP. I will consider your suggestion, and find the Indian GDP for those years and include in my regression. Let's see if that gives me better results.

My data ranged from 1962 to 2004. Not all of the data covered all those periods. There were some data that were not applicable for all the years covered, for example, the Maoist War, which started only in 1990.

And yes, the data for DEM and WAR were dummy variables. 1 for "yes" and 0 for "no".

As for Bibas's idea of including the "inflation", I thought about it at the time of research. But I could not find good data on Nepali inflation for the time period I covered. So, I instead used the inflation adjusted GDP change in my data. So, the GDP I used in my research is not actually the dollar or rupees amount GDP, it is the percent change in adjusted GDP. That should have covered for the "inflation".

mickthesick ,
I do not know why you wanted to work for the test-statistics so much. Don't care too much about the test-statistics as long as you have sufficient reason to believe some variables are important from theoretical aspect. Basically, you have to include all the variables which you think are important. There is this tendency of emerging economists to focus on making the t-statistics significant, getting a high-R -square value and so forth.
What I would suggest is that include all the variables which you think are important. You are here to see what data tells, not manipulate the data to get desired results.

I think you need to add some more variables. And as for not finding the inflation rates, I think you can find most of the data from World Bank. So, consult World Bank Statistics...

This is the reason, I never come to any conclusion by reading just one study. One can always manipulate the variables and data until the desired results are achieved. However, if from time and again, many studies come to the same conclusion, we have some information about the reality.

I think finding the data about Indian GDP should pose no problem at all...there have been a lot of studies done on India.

I'd suggest that you consult with your professor and get his feedback.

.First, as a reply to Bibas's suggestion that I may have manipulated the data, my answer is: No, I did not manipulate any data.

Second, the research I did was for my independent project class, and I included all the variables that I could find. At that time, I could not find the Indian GDP, and therefore could not inlcude it.

Third, the t-statistics and high R-squared values that I got in my study were not influenced by any manipulation. Those were what I got from my data. A high R-squared value doesn't only mean my variables were able to explain most of the changes, it also means that there may be a multi-collinearity problem among the variables. And I am aware of that problem. I tried to get rid of it, but could not.

Also, my research was definitely not complete, because as you have pointed out, and as I myself have confessed, that there are other important variables that I could have included in my research, but I could not include them because of various reasons and time restrictions.

mickthesick ,
A friend of mine had done a research on that topic. If you want to get some ideas from him, do shoot me an email.

What I would suggest is that you change the dummy variable WAR to a continuous one. Lets say you can range it from 1-5 depending upon how bad the country was affected in that particular year. It makes more sense as the maoist war did not have a constant effect on the economy. Some years were more troublesome to the nation than others. One thing you can use to determine the degree of insecurity and instability caused by the war is to look at the number of people who died due to war in that year. A better idea would be however, to include even the bandhs and so forth to account for the instability created by the war.

I was interested in this topic but did not have time for this. But, you can continue this topic and develop into a thesis if you are planning to write one.

And again, forget about the test-statistics...if they are significant, its good, if not...doesnt matter...