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It is a stylised fact that financial 'repression' retards economic growth. Hence, financial liberalization is advocated to remove the stranglehold on the economy. Financial liberalization policy argues that deregulation of interest rate would result in a higher real interest rate which would lead to increased savings, increased investment and achieve efficiency in financial resource allocation. Past studies have reported inconclusive results regarding the interest rate effects on savings and investment. This examines the financial liberalization hypothesis by employing autoregressive distributed lag (ARDL) modelling approach on Nepalese data. Results show that the real interest rate affects both savings and investment positively.

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Unit root test is viewed as mandatory on time series data since these data may possess specific properties like memory, trend and structural break. The results obtained by employing conventional regression methods without testing for the unit root in time series data might be misleading. This paper presents an overview of various unit root test methods and conducts the unit root test on Nepalese key macroeconomic data allowing one endogenous structural break. The test results show that out of the 18 macroeconomic variables, 10 have unit roots and the remaining 8 are stationary. An analysis of the structural break dates of these variables suggests that the Nepalese economy has gone through a structural change after mid-1980s.

This paper examines the impact of food price hike on poverty in Nepal employing crosssectional sample household consumption data of Nepal Living Standard Survey III. The findings of the study suggest that a 10 percent rise in food prices is likely to increase overall poverty in Nepal by 4 percentage points. It implies that one percent rise in food inflation will push 100 thousand additional people into overall poverty and 180 thousand additional people into food poverty. The paper also analyses the impact at the regional level and suggests some policy options to contain the food inflation and to mitigate the impact of food price hike on the poor section of the population.