The Impact Of Indian Inflation On The Economy Of Nepal Essay

“Provide Summary Level Paper (limit 10 pages) “Purpose and Practice of Inflation Forecasting by Nation” – for insertion after the “Measures of Inflation”

The internet has allowed the money market to operate 24 hours a day. It has been noted however that exchange rate volatility has increased,[v] which makes it more difficult for the government to set monetary policy.

In this paper, we will be using the log-log model. The log-log model used for the demand for wealth (attuned for inflation). We will be using the M1, as a display, for demand on wealth and interest rate as the illuminating variable affecting the demand for wealth. Using the regression, we will study the hypothesis. For this paper, the hypothesis used will talk about the connection between money and the interest rate. The null hypothesis, in this case, will be the interest affecting the demand for money in the economy. The data that we will be reviewing is from October 2008 to October 2011, 3 years worth of data. This connection will give us the basic understanding of the performance of the monetary policy in US economy after the crisis.

Federal governments through the central banks bear the role sustaining a stable economy for its citizens. Besides the fiscal policy, monetary policy is a core approach utilized to regulate the money supply in the economy. In an economic perspective, increased money supply strengthens the consumers ‘purchasing power prompting them to continue borrowing with an urge to invest. Consequently, interests rate raises while the price for bonds lowers, thus causing inflation. To level, the government may intervene in central banks by increasing the bank lending rate as a strategy to reduce supply of money in the market.

Synchronously, the developing economies such as some Asian and South American regions which exported their experienced workers to the overseas market can also reduce the unemployment pressure that governments must face in long-term period. On the other hand, international remittances are beneficial for both migrant-sending and migrant-receiving countries. Statistics discovered that the international remittances transmitted to the homeland of 35 to 40 million migrant workers are currently estimated to be about US $66 billion per year, and represent the second largest international monetary trade flow, exceeded only by petrol (Sasikumar 2001). For the countries which exported labour to rich countries, they would gain enormous exchange funds from international remittances and regard the money as foreign investment to facilitate their economic development. By contrary, for these migrant-receiving countries, the outflow of vast domestic currency would take away some financial threats such as malignant inflation to a great extend. Nay, the popularization of one country's currency could also accelerate its economic fluidity and strengthen its economic influence to the other countries.

There has been a long standing controversy among the economist about the validity of PPP (Purchasing Power Parity) in the long run. The parity reveals that prices in two different economies should be identical to each other when they expressed in terms of the same currency. It is a central building block in the monetary models of exchange rate determination. One of the most common practices, to test the validity of PPP is through unit root test of real exchange rate. In this paper unit root test has been done based on the data on Bangladesh and its major trading partner India, to see whether exchange rate has unit root or not. It has been found out that the PPP holds i.e. real exchange is not trend stationary in the

Banks fail when they are no longer able to meet their obligations. They might be unable to pay the bills, or a bank failure may arise because they can 't provide cash when depositors demand it.  Nepal Development Bank Limited (NDBL) which aspired to enter the new millennium with profitability, size and efficiency on par with the best of the banks in the world is one of the banks that have been a victim of its own irresponsible acts. One factor behind the misfortune of Nepal Development Bank Limited is bad corporate governance. Economists say corporate governance has appeared as the biggest challenge for the banking sector. According to them, the easy licensing policy adopted over the last decade is the main reason behind today’s problems, as everybody with certain income could open BFIs.

The impact of the change interest rates and inflation has a persistent impact on the well being of any given society. For this purpose it is the understanding that each individual in society should have an understanding of what such changes bring fourth for the man on the street. In this introduction, we are going to introduce certain key points to remember when dealing with interest rate- and inflation changes.

Inflation doubled in 2007 and reached a peak at 28% in 2008.The fiscal make up 4-5% GDP and the trade deficit accounted for 20% GDP in which approximately $US17.5 billion dollars. The influence of high fuel combine with food prices and high domestic demand lead to high inflation. The high price of fuel in Vietnam illustrates global fuel prices and the high domestic demand of country importing fuel. Furthermore, the increase in global food prices affect detrimental to the high inflation in Vietnam.(Figure 2)

A lot of literatures have already studied about the inflation and inflation prediction and in this paper literature review will be discussed from the theoretical aspect and empirical aspect. The researches of the inflation, which are studied, by a lot of scholars in the field of economics have been conducted for a long time especially during the 1970s and it is the heyday when people would like to pay more attention to research the inflation. The inflation has become a hot topic among the economic life and social life since 1987. However, no matter whether it is in the western economic field or in the Chinese economic field, people have different definitions on the inflation and so far there is no unified opinion and conclusion can be accepted generally by everyone. For example, Wyplosz and Burda (1997), Blanchard (2000), and Barro (1997) define that inflation is a sustained rising in the overall price level of products and services in an economy throughout the time period. By contrast, Zha and Zhong (2016) define that inflation is considerable as the mechanism to improve economic growth. In general, the common definition of the inflation is that the inflation is a continuous rising process in the aspect of price. In other words, the value of the currency decreases continually.

Inflation is blazing subject that delays the economic development of the country. It is becoming extra hectic to economists, politicians and even people also. Factors on both demand and supply effect the inflation. So the stabilization strategies ought to consequently focus on both demand manipulation as well as

These conclusions correspond to the claim of the quantitative theory that money is the primary determinant of nominal income. If thus the rate of money circulation does not change (here the rate need not necessarily by a constant ), then money exclusively determines changes in the price level and nominal income, so monetary policy can, through regulating the development of the individual money aggregates (M1, M2, etc.), influence macroeconomic variables and predict their development.

Effectiveness of fiscal and monetary policies to manage inflation, economic growth and exchange rate volatility in recent years in Kenya.

Remittances typically refer to transfers of money by foreign workers to their home countries. Remittances are not a new phenomenon in the world, being a normal associated to migration which has always been a part of human history. Remittances are playing an important role in the economies of many developing and low income countries. Pakistan is a labour abundant country; hence, as neoclassical theory shows, if workers are unable to find jobs and/or wages to satisfy their needs, they will look elsewhere. Pakistan’s history provides us with a new trend of emigration nearly each decade. Remittance is an important source of foreign exchange earnings for Pakistan since 1970. During the past four decade Pakistan received

Disadvantages of inflation include high inflation rates that can cause hesitation and mistakes leading to less investment. It is discussed that countries with higher inflation, have lower rates of investment and economic growth. The higher the inflation the lower world-wide competitiveness. Another disadvantage is menu costs and the costs of changing price lists, stabile wage growth and declining incomes. Most importantly it can dcreas the real value of savings, which may affect older people who live on savings. However, it does depend on whether interest rates are higher than the inflation rate.