## Nepal: Selected Issues

_IMF Staff Country Reports, February 17, 2019_

## Source details

**Canonical URL:** [Nepal: Selected Issues](https://www.imf.org/en/publications/cr/issues/2019/02/15/nepal-selected-issues-46623)

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## Bibliographic details
- Published: February 17, 2019
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781484399781.002

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### 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

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## Content in this bundle

- **Nepal: Selected Issues; IMF Country Report No. 19/61; January 24, 2019**
  - [Nepal: Selected Issues; IMF Country Report No. 19/61; January 24, 2019 (Markdown version)](/-/media/files/publications/cr/2019/1nplea2019002.pdf.md){rel="alternate" type="text/markdown"}
  - [Nepal: Selected Issues; IMF Country Report No. 19/61; January 24, 2019 (PDF)](/-/media/files/publications/cr/2019/1nplea2019002.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2019/02/15/nepal-selected-issues-46623_