Financial intermediaries as a growth catalyst: A time-series analysis of Nepal using the Cobb–Douglas function framework

https://doi.org/10.51867/ajernet.7.1.80

Authors

Keywords:

Cobb-Douglas Production Function, Economic Growth, Financial Development, Nepal

Abstract

This study examines the impact of financial development (FDS) on economic growth (ECOG) in Nepal, utilizing the Cobb-Douglas production function (CDPF). This study examines the key factors, including domestic credit (DCR), capital formation (CFR), exports, and population growth (POP), to assess their long- and short-term impacts on ECOG. This study utilizes secondary data for the period from 1992 to 2023. It employs the Autoregressive Distributed Lag (ARDL) bounds testing approach to investigate long-term relationships and short-term dynamics among the aforementioned study variables. The results show that DCR—a proxy of FDS—has a favorable effect on GDP in the long run, suggesting that DCR impacts ECOG. However, DCR does not impact ECOG in the short run. The results showed that CFR and exports have an influence on ECOG in both the short and long term. In contrast, the results showed that POP does not affect ECOG in either the short or long term. Annually, approximately 41 percent of deviations from long-term equilibrium are corrected. Results indicate that FDS, CFR, and exports are crucial for Nepalese ECOG. Policymakers should develop policies that increase capital investment, encourage export growth, and alleviate barriers to FDS, thereby fostering sustainable ECOG in Nepal.

Dimensions

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Published

2026-03-06

How to Cite

Upadhyaya, Y. M., Ghimire, S. R., & Budhathoki, P. B. (2026). Financial intermediaries as a growth catalyst: A time-series analysis of Nepal using the Cobb–Douglas function framework. African Journal of Empirical Research, 7(1), 936–949. https://doi.org/10.51867/ajernet.7.1.80

Issue

Vol. 7 No. 1 (2026): Jan-Mar 2026

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Articles
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Copyright (c) 2026 Yadav Mani Upadhyaya, Shiva Raj Ghimire, Prem Bahadur Budhathoki

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