With a view to study whether the wage increases are the most significant sources of cost-push inflation, price equations inclusive of different forms of commonly available money wages along with other relevant variables are estimated across the different regions of the country. Carpenter’s wage in Kathmandu and agricultural laborer’s wage in Terai were found to be significant wage variables to exert pressure on the movement of the national prices. Granger Bivariate Causality Test done to see the cause and effect relationship between money wages and rate of inflation revealed the unilateral causation effect running from the rate of inflation to masonry wage in Kathmandu and agricultural labor wage in Terai while the reverse course was seen running from the industrial laborer’s wage to the rate of inflation.

This paper makes use of co-integration analysis and error-correction modelling techniques to examine the money demand function in Nepal. In addition to using the recently developed time series techniques, the rate of variables such as agricultural GDP, non-agricultural GDP, rate of return on savings deposits etc. are examined vividly. The co-integration test suggests that the demands for narrow money (m1) is co-integrated with agricultural as well as non-agricultural income and also with the interest rate on savings deposit. On the whole the study confirms the belief that a statistically robust demand for m1 can be estimated for Nepal using an error-correction dynamic specification as well as the variables under consideration. The empirical analysis of money demand function thus exhibits that demand for real money balance in Nepal is a stable and predictable function of a few variables.

Hypothesis testing identifies a set of significant variables that appear to influence Nepal’s monetary policy. After finding a structural break in 1989 (in line with the political regime shift), lagged Indian monetary base and the official exchange rate have respective negative and positive effects on Nepalese monetary base growth. This supports earlier results which indicate that the Nepalese monetary authority plays a stabilizing role given that both countries do not face symmetric shocks and have a well behaved (hard) pegged exchange rate, and is consistent with the policy of the Nepalese monetary authority.

A number of factors such a snowy mountains, beautiful landscape, and cultural monuments are the main attractions for visitors to Nepal. Tourism is one of the major contributors to foreign currency receipts in Nepal. Both the number of visitors and of hotel beds are increasing, however, the increase in the former is less than that of the latter. This paper is a study of demand determinants of Nepalese tourism. The tourist flow from 14 major sending countries is used in the study. The period examined is 1974-1991 and variables used include GDP per capita in constant 1985 US dollars, population of the sending countries, air distance between one of the major cities in each sending country and Kathmandu airport, airfare in US dollars from Kathmandu to each sending country’s main airport, real exchange rates between sending country and Nepal, and the consumer price index in constant 1980 prices. The log linear model is selected for the study after a comparison with the linear model. The regression analysis is carried out using generalized least squares for panel data and the White covariance consistence matrix procedure for individual time series. A specific model for each individual country is examined. The results indicate that all the variables considered are important determinants of tourism demand in Nepal. Above all income variable is highly significant variable in cases of both India and overseas arrivals. Besides, relative exchange rates between India and Nepal is greatly important variable.