Effect of foreign trade in GDP of Nepal

Abstract

This paper examines the effect of foreign trade in GDP of Nepal. The study shows the linkage between GDP with import, export, and capital expenditure. The objectives of study are to study the growth trend of foreign trend, capital expenditure and to examine the relationship between between import, export, capital expenditure and GDP of Nepal. The Engle Granger Test has been used to examine the long run relationship between foreign trade and GDP of Nepal in long run. To produce much reliable result, various econometrics tools were employed to check autocorrelation function, goodness of fit and stability of the model. The data frequency is annual and obtained from government sources. The analysis is based on data for the period of 1990/91 to 2020/21.The study concludes that the effect of RGDP on RIM and RCE is positive while the effect of RGDP on REX is negative.