Impact of official development assistance on external trade balance of Nepal: An Empirical Analysis

Abstract

This paper examines the impact of Official development assistance and official aid received (ODA)on external balance of Nepal for the period 1990-2019. Moreover, the study also includes tax revenue and tourism to analyze with the external balance including the same time period. During this time period, the country experienced many notable occurrences. Specially, the abolishment of monarchy resulted in Nepal and it was declared as a republic country. As many important phenomena happened during this period, so this particular time period is chosen as a research study. In order to analyze the data and find the outcome, a multiple linear regression model was conducted. According to the research and its hypotheses that were tested with the model confirmed that ODA had a significant negative relationship with external balance. Moreover, other independent variables tax revenue and tourism were also regressed together with the dependent variable and found the similar significant negative effect on external trade balance of a country. During the study, the annual time series data from 1990-2019 has been regressed including external balance as dependent variable and ODA, tax revenue and tourism as independent variables.