An Econometric Analysis on Interest Rate Reforms and Financial Deepening

Laxman Tandan, Ananta Raj Kafle, Khageshyor Khanal
International Journal of Finance, Insurance and Risk Management, Volume 12, Issue 3, 3-22, 2022
DOI: 10.35808/ijfirm/321

Abstract:

Purpose: This paper intends to analyze the impact of interest rate reforms on financial deepening in Nepal during 1989 Q1 to 2021 Q2. Design/Methodology/Approach: This paper uses seven different measures of financial deepening and applied vector error correction model. An empirical result strongly supports the hypothesis that interest rate reforms lead to financial deepening and did not supported by two variables export and change of deposit. Similarly, Granger causality test show the unidirectional causal relationship among most of the variables. Findings: The findings suggest that financial reforms need to accelerate the financial reforms that was lunched since 1989 and to improve the efficiency of the financial system, stimulate the saving /investment and economic growth.


Cite Article (APA Style)