Uncertainty in government’s economic policies has a significant negative impact on the country’s economy, with the stock market and imports among the worst affected.
According to a new study, titled Macroeconomic Effects of Economic Policy Uncertainty: Evidence from Nepal, by the Nepal Rastra Bank, growing uncertainty over fiscal and monetary policies weakens economic activity, discourages investment and affects financial markets. It estimates that prolonged policy uncertainty can reduce the Nepal Stock Exchange (Nepse) index by as much as 10 percent, real imports by 15 percent, private sector credit by 5 percent and gross domestic product (GDP) by around 2 percent.
The working paper was prepared by central bank officials Birendra Bahadur Budha and Roshan Byanjankar, along with researcher Swastik Nepal. It is the first study to develop an Economic Policy Uncertainty Index…
