Nepal: Selected Issues
IMF Staff Country Reports, February 17, 2019
Source details
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- Nepal: Selected Issues
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Bibliographic details
- Published: February 17, 2019
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781484399781.002
Summary findings
- The paper examines the degree to which inflation co-moves between India and a panel of countries in Asia.
- Considerable co-movement in headline inflation rates between India and Nepal is driven almost exclusively by food-inflation co-movement.
- The role for inflation spillovers emanating from India in driving non-food inflation in Nepal appears limited.
- Food inflation co-movement between India and other countries is higher where the co-movement in rainfall deviations from seasonal norms is highest.
- Core inflation co-movement is weak; idiosyncratic domestic factors such as economic slack, exchange-rate movements, and differing degrees of passthrough from food- and energy-price shocks play an important role.
Policy implications and recommendations
- Nepal should rely on domestic monetary policy rather than stable inflation in India to achieve stable domestic inflation.
- Domestic monetary policy is primarily effective only in controlling core inflation.
- Domestic monetary policy needs to be calibrated to domestic inflationary pressures—Nepal cannot necessarily rely on stable inflation in India to achieve stable domestic inflation.
Subject coverage and keywords
- Subject: Financial inclusion, Financial markets, Fiscal federalism, Fiscal policy, Inflation, Prices, Public financial management (PFM)
- Keywords: Asia and Pacific, CR, Financial inclusion, Fiscal federalism, Global, government initiative, headline inflation inflation rate, India-Nepal case, Inflation, ISCR, Nepal, policy effort, SME credit guarantee scheme, SME lending, South Asia
Content in this bundle
- Nepal: Selected Issues; IMF Country Report No. 19/61; January 24, 2019