Determinants of Foreign Trade in Nepal and Empirical Analysis on Its Impact on Nepal’s Export.pdf

1、Nepal has been through immense political and economic changes in the past decade. Acknowledging the importance of trade in the economic development of a country，Nepal stepped into a broad multilateral framework with its

2、accession into the World Trade Organization in 2004. Since then，several bilateral and regional trade agreements have been signed in order to assimilate its trade sector into the world wide mainstream. So far，several poli

3、cies have also been reformed in order to strengthen its commitments towards liberalized economy. The Government of Nepal approved a new strategic document，the Nepal Trade Integration Strategy (NTIS) in 2010. The document

4、 was approved for the identification of the fields with potential comparative advantage so that its dwindling exports could be revitalizeD.In spite of all these positive approach，Nepal still remains an impoverished natio

5、n with an ever-widening trade deficit. Matter of fact，there still lays numerous internal limitations and bottlenecks which are preventing Nepal from acquiring benefits of the multilateral framework and several other agre

6、ements. Thus，several challenges lies at the moment，and need to find solution to address these issues so that the NTIS could be effectively implemented by developing effective collaborative mechanism between the governmen

7、ts，the private sector and international partners.
　　Gravity model is employed in this study to estimate the trade potentiality of Nepal. In the recent years，gravity model has been widely used in international trade fo

8、r the empirical research in order to explore the bilateral trading prospects and relationship. We employ FE and RE as estimation techniques and used Hausman test to distinguish between them. The empirical results accordi

9、ng to the panel data set containing 41 major trade partner countries for 20 years found that export of Nepal is explained by real GDP of trade partner countries. That is why，the increase in real GDP of trade partner coun

10、tries increases. The result is somehow fluctuating as limits have been crossed by some countries whereas some countries are still below the potential trade. Nepal exports more to SAFTA countries than non SAFTA. As per ba

11、sic idea of gravity model，it is very understandable that higher the distance lower the trade and that is why distance to trade partner countries is very much significant. Time invariant factors are also significant to de

12、termine the trade balance of Nepal according to the country specific fixed effect analysis. Thus，the results suggest that，in comparison to the trade with China，trade with India is quite substantial. In accordance wi