CENTRAL BANK INDEPENDENCE IN MONEYTARY POLICY

A Seminar Paper

By

Amisha Shrestha

TU Regd No:- 7-2-288-3-2022

Symbol No:- 33203/22

Bachelor in Business Administration (BBA)

Second Semester

Seminar on Contemporary Issues of Macroeconomics (ECO 205)

Submitted to:

BBA Department

Aadikavi Bhanubhakta Campus

Tribhuwan University

January, 2024

i
 Recommendation Letter
This is to certify that the seminar paper on contemporary macroeconomic issues entitled
CENTRAL BANK INDEPENDENCE IN MONETARY POLICY is an academic
work done by Amisha Shrestha submitted in the partial fulfillment of the requirement
for the degree of Bachelor of Business Administration (BBA) at Faculty of
Management, Tribhuwan University under my guidance and supervision. To the best
of my knowledge, the information presented him/her in the seminar paper has not been
submitted earlier.

………………………..

Signature

Name of the Supervisor: Janak Kaphle

Date:

ii
 TABLE OF CONTENT

Content Page no.

Title i
Recommendation Letter ii
List of Table iv
Abbreviation v
CHAPTER I: INTRODUCTION
1.1 Background of the Paper 1
1.2 Statement of the Problem 3
1.3 Objectives 4
1.4 Methodology 4
1.5 Structure of the Paper 4
CHAPTER II: DESCRIPTION AND ANALYSIS
2.1 Literature Review 5
2.2 Data Presentation and Analysis 13
2.3 Findings 14
CHAPTER III: CONCLUSION
3.1 Conclusion 15

References

iii
 List of Table

Table no. Title Page no.

1 Summary Table 10

2 Dynamics of Federal fund rate target range 13

and Inflation objective

iv
 Abbreviations

CPI: Consumer Price Index

FY: Fiscal Year

GDP: Gross Domestic Product

NPR: Nepalese Rupees

NRB: Nepal Rastra Bank

OMO: Open Market Operation

SLF: Standing Liquidity Facility

USD: United States Dollar

v
 CHAPTER I
INTRODUCTION

1.1 Background of the Paper

Gautam (2020), monetary policy is a critical determinant in shaping the economic

trajectories of nations, requiring analysis for effective policymaking. The focus of this
paper lies in a thorough exploration of Nepal's monetary policy landscape, emphasizing
key dimensions such as inflation convergence, liquidity management, and the
effectiveness of policy transmission mechanisms. The optimal policy rule is a Taylor-
type rule with a high degree of interest rate smoothing and a moderate response to
inflation and output gaps.

Beyer (2008) monetary policy revolves around sustaining foreign exchange reserves
adequate to cover goods and services imports for a specified period. The analysis
indicates that, during this period, the foreign exchange reserve amounted to NPR
1480.87 billion (USD 11.30 billion), ensuring coverage for 9.6 months. The policy rate
is intricately linked to the capacity of foreign exchange reserves, not falling below the
annual expected inflation rate, which stood at 7.77 percent over the eleven months of
FY 2022/23.

Adrian and Shin. (2009) investigates into the intricacies of liquidity management
strategies employed by the Nepal Rastra Bank (NRB). The key components of this
strategy include open market operations, growth projections for broad money supply,
and credit to the private sector. The broad money supply witnessed a 10.9 percent
increase, credit to the private sector rose by 3.6 percent, and the weighted average
interbank rate stood at 6.69 percent. The policy introduces several new initiatives and
reforms to enhance the effectiveness and efficiency of the monetary policy transmission
and the financial sector stability and development.

Bhattarai and Sharma (2019) this work explores the nuances of the interest rate corridor.
Projecting adjustments in interest rates, such as the bank rate, policy rate, and deposit
collection rate, are highlighted. These adjustments are strategically aimed at preserving
macroeconomic stability in the face of price pressure and foreign exchange reserve

1
considerations. They also recommend enhancing the development and regulation of the
financial sector to improve the effectiveness and efficiency of monetary policy
transmission. Independence is crucial for monetary policies aimed at achieving low and
stable inflation.

Nepal Rastra Bank. (2022) monetary policy introduced by the NRB, including the
establishment of the Open Market Operation Stabilization Fund and the provision of
the Standing Liquidity Facility. These initiatives underscore the NRB's commitment to
enhancing efficiency and effectiveness in liquidity management within Nepal's
financial system. The central bank adopted a cautious tightening stance in response to
deteriorating macroeconomic indicators, aiming to achieve government targets for
economic growth and inflation. The Nepal Rastra Bank (NRB) aims to keep inflation
within 7%. This target helps strike a balance between price stability and economic
growth. Inflation surged in the previous fiscal year, influenced by a liberal monetary
policy, increased petroleum prices, and credit expansion by Banks and Financial
Institutions. The monetary policy measures and financial sector provisions for 2022/23,
covering various aspects such as monetary management, financial sector reform and
regulation, foreign exchange management, refinance and concessional loan,
microfinance, payment system, financial literacy and inclusion, and projection of
monetary survey.

Bhattarai and Sharma (2017) analysis extends beyond the current state of monetary
policy, delving into the historical context. The examination traces the evolution of
Nepal's monetary policy from its inception in the 1950s to the present day. The primary
goal of Nepal’s monetary policy is to support the government’s economic growth
objectives while maintaining macroeconomic stability. This historical perspective
yields valuable insights into the shifts from direct instruments to market-based
mechanisms, showcasing the adaptation of Nepal's monetary policy to evolving
economic paradigms. It prioritizes price and interest rate stability, credit demand
security, and external stability. Moreover, they show that monetary policy shocks can
affect financial stability indicators, such as bank profitability, non-performing loans and
bank capital ratios. monetary policy shocks have significant and persistent effects on
output, inflation, exchange rates, bank credit and stock prices in Nepal.

2
"Monetary Policy" makes a large contribution to comprehending Nepal's monetary
landscape. Through a meticulous examination of current policy measures and a
historical contextualization, the paper enriches our understanding of the multifaceted
challenges and opportunities inherent in the nation's monetary policy domain.

1.2 Statement of the Problem

Bhattarai and Sharma (2017) within the comprehensive exploration of Nepal's

monetary policy landscape, certain critical issues and challenges come to the
demanding attention. This paper acknowledges the significance of maintaining foreign
exchange reserves to cover imports for a specific duration. However, an inherent
problem lies in determining the optimal level of reserves required to ensure economic
stability. The analysis indicates that the foreign exchange reserve, standing at NPR
1480.87 billion (USD 11.30 billion), covers 9.6 months. Foreign currency reserves act
as a safety net during economic crises. When needed, central banks can exchange
foreign currency for the local currency, ensuring continued import and export activities.
A healthy reserve position reassures investors during times of uncertainty, preventing
capital flight.

Ghosh, S. (2008), the challenge lies in understanding how effectively the policy rate
can curb inflationary pressures. The eleven-month inflation rate of 7.77 percent raises
questions about the dynamics of inflation convergence with the policy rate.
Management strategies employed by the Nepal Rastra Bank (NRB), encompassing
open market operations, projections for broad money supply, and credit to the private
sector. Despite the reported growth in broad money supply and private sector credit,
challenges might exist in fine-tuning these strategies to respond promptly to evolving
economic conditions.

The adjustments in interest rates, including the bank rate, policy rate, and deposit
collection rate, are highlighted as measures to maintain macroeconomic stability.
However, the effectiveness of these adjustments in navigating the delicate balance
between price pressures and foreign exchange reserves remains a question. The
historical perspective introduced in the paper raises questions about the evolution of
Nepal's monetary policy. the introduction of operational mechanisms like the Open
Market Operation Stabilization Fund and the Standing Liquidity Facility, the efficacy
of these initiatives warrants examination. In essence, the statement of the problem

3
summarizes the need for a nuanced understanding of the identified issues to pave the
way for more effective and responsive monetary policy in Nepal.

The following question can be raised from given objective :

➢ How central bank independence can be exist in monetary policy?

➢ How can we acknowlwdge the current policy?
1.3 Objectives
The following points can be taken as objectives:
➢ To analyze the existing monetary policy in central bank independence.
➢ To examine key indicators to acknowledge the current policy environment.

1.4 Methodology

The methodology employed in this monetary policy analysis a multifaceted approach,

integrating quantitative assessments and historical exploration. The study relies on a
blend of contemporary data analysis and depth review of the evolution of Nepal's
monetary policy over time. The methodology employed in this paper aims to offer a
comprehensive understanding of Nepal's monetary landscape, integrating both
contemporary quantitative analysis and a nuanced historical perspective.

1.5 Structure of the Paper

This paper is classified into three-part introduction description, analysis and conclusion.
Introduction includes five different topics, they are background of the study, statement
of the problem, objectives methodology and structure of the paper. Similarly,
description and analysis contain three different topics, they are literature review, data
presentation and analysis and findings. Then finally, conclusion contain two topics,
they are conclusion and implications.

4
 CHAPTER II
DESCRIPTION AND ANALYSIS

2.1 Literature Review

A literature review is a summary and critical analysis of existing research and writings
on a specific topic. It provides an overview of the current state of knowledge in a
particular field, highlighting key findings, trends, and gaps in research. The purpose is
to establish the context for a new study, identify gaps in current knowledge, and
demonstrate the need for further research. It provides an overview of the existing
research and scholarly work on a particular subject. By examining various sources, it
allows you to understand the current state of knowledge in that field. While research on
monetary policy in Nepal remains relatively scarce, several notable studies have delved
into the effectiveness of monetary policy for the economy.

Conceptual Review

Alesina and Summers (1993) analyzed that the central bank independence refers to the
degree of autonomy that a country’s central bank has from the government. Central
banks are responsible for implementing monetary policy, which involves regulating the
supply of money and credit in the economy. Conceptually, central bank independence
refers to the degree of autonomy that a country’s central bank has from the government.
Central banks are responsible for implementing monetary policy, which involves
regulating the supply of money and credit in the economy. Central banks tend to reduce
the rate of inflation. This aligns with dynamic inconsistency theories of inflation which
promotes price stability, it has no measurable impact on real economic performance.
Real variables such as growth, unemployment, and real interest rates are not
significantly affected by CBI.

Gambacorta (2003) observed the arguments and evidence in the literature on whether
and how credit market imperfections may play a role in the transmission of monetary
policy. They analyze the response to tight money of different forms of credit and
different types of borrowers. Additionally, it pointed out the limited effectiveness of
the central bank's interventions in stabilizing the exchange rate this implies that the
central bank's endeavors to ensure price stability and foster economic growth have been

5
effective. A central bank intervention occurs when a central bank buys or sells its own
currency in the foreign exchange market. The primary goal is to influence the value of
the currency relative to other currencies. Central banks intervene to prevent excessive
appreciation of their currency. A strong currency can harm export-oriented sectors.
Lowering interest rates is a form of intervention to stimulate economic growth.

Empirical Review

Bade and Parkin (1980) analyzed Central Bank Laws and Monetary Policy, Department
of Economics. The main objective of this study was to investigate the relationship
between central bank laws and monetary policies across different countries based on
the legal provisions governing the appointment, dismissal, and policy objectives of
central bank governors and boards. By analyzing evidence, the study found that
countries with more independent central banks tend to have lower inflation rates, lower
money growth rates, and more stable exchange rates. The study concluded that central
bank independence is an important factor for achieving monetary stability and avoiding
inflationary pressures.

Barro and Gordon (1983) examined Rules, Discretion and Reputation in a Model of
Monetary Policy. The main objective of this study was to analyze the trade-offs
between rules and discretion in monetary policy, and to examine the role of reputation
in sustaining a discretionary equilibrium. By analyzing the evidence, the study found
that under discretion, the equilibrium inflation rate and money growth rate are higher
than the optimal ones, and that reputational forces can mitigate this inefficiency by
making the policymaker behave more like a rule and the study concluded that under
discretion, the equilibrium inflation rate and money growth rate are higher than the
optimal ones, and that reputational forces can mitigate this inefficiency by making the
policymaker behave more like a rule.

Blinder (1998) observed the Central Banking in Theory and Practice. The main
objective of this study was to execute this strategy; acquiring appropriate information
does not pose much of a problem for macro-policymaking which is based on historical
and comparative analysis of central banking practices and discuss whether the research
is theoretical, empirical, or a combination of both. By analyzing the evidence, the study
found the book explores various aspects of central banking, including, policy tools and
strategies, and the challenges faced by central banks in practice and the study conclude

6
that the understanding of central banking, its implications for economic policy, and any
recommendations or insights for practitioners and policymakers.

Kassim, Majid, M.S.A. (2008) examine the role of bank lending in the monetary
transmission process of a developing economy. The main objective of this study was to
provide insights into the role of bank loans in the monetary transmission process, which
refers to how changes in monetary policy by the central bank affect the broader
economy. and which used a descriptive and causal comparative research design to
examine the factors that affect commercial banks’ lending rates in Nepal by analyzing
the evidence, the study found that the authors aim to provide empirical evidence on the
importance of bank loans in channeling monetary policy effects to the real economy.
The study conclude that the commercial banks should reduce their operating costs,
improve their profitability, and manage their credit risk to offer competitive lending
rates to their customers.

Blanchard, Dell’Arricia, and Mauro (2010) analyzed rethinking macroeconomic policy.

The main objective of this study was to review the elements of the pre-crisis consensus,
identify shortcomings, and propose potential revisions to macroeconomic policy
frameworks and to study the use of foreign exchange intervention to prevent currency
appreciation and maintain competitiveness and by analyzing the evidence, the study
found that the article discusses the need to reassess macroeconomic policy considering
the global financial crisis. It suggests that the crisis has challenged the pre-crisis
consensus. Therefore, the study conclude that the new macroeconomic policy
framework should be more adaptable, more coordinated, and more attentive to the
financial sector.

Gambacorta and Marques-Ibanez (2011) observed the bank lending channel. The main
objective of this study was to focus on influence the functioning of the monetary
transmission mechanism particularly in periods of crisis and to examine the changes in
the bank lending channel of monetary policy transmission before and during the 2007-
2010 financial crisis. By analyzing the evidence the study found the analyzed role of the
bank lending channel in the transmission of monetary policy during the crisis. They
likely discuss the impact of the crisis on the stability of financial intermediaries and the
smooth transmission of credit. So, the study conclude that the crisis period was marked

7
by structural changes in the bank lending channel, as banks with weaker core capital
positions, greater dependence on market funding and non-interest income, and higher
risk perception restricted their loan supply more strongly. This research investigates
into the intricate relationship between the Italian banking system and the transmission
of monetary policy, using data at the bank level

Igan, and Pinheiro.(2011) analyzed credit growth and bank soundness. The main
objective of this study was to analyze the relationship between credit growth and bank
soundness considering the potential two-way causality and to examine the use of
simultaneous equation framework also to analyze the relationship between credit
growth and bank soundness, considering the potential two-way causality. By analyzing
the evidence the study found that the article derives and estimates an interest rate rule
that approximates the way the Bundesbank conducted monetary policy over the period
1975-1998.Therefore, the study conclude that the foreign-owned banks are less affected
by credit booms than domestic banks, while state-owned banks are more affected.

Bhattarai and Sharma. (2019) examined monetary policy implementation. The main
objective of this study was to influence the money supply and interest rates. Standing
facilities provide a means for banks to borrow or deposit funds with the central bank at
predetermined rate and to examine the use of structural vector autoregression model to
analyze the effects of monetary policy shocks on macroeconomic and financial
variables in Nepal, a low-income country with underdeveloped financial markets. By
analyzing the evidence the study found that the article explores the theory, historical
context, and current practices of monetary policy. It may discuss the evolution of
monetary policy implementation, and the effective implementation. and the of effective
for achieving the objectives of monetary policy. The study conclude that monetary
policy in Nepal has important implications for both macroeconomic and financial
stability also they suggest that the central bank should take into account the feedback
effects between monetary policy and financial conditions, and adopt a more forward-
looking and flexible approach to monetary policy.

Gautam (2020) observed the monetary policy parameterization, Central Department of

Economics. The main objective of this study was to strict capital controls, the foreign
currency received through remittance inflows is liquidated by NRB in exchange of

8
Nepalese currency and to examine the model parameters using quarterly data from 2000
to 2018 and to solve the model using a second-order approximation method. By
analyzing the evidence of the study found that the analysis suggests that Nepalese
business cycle is primarily driven by monetary policy shocks and supply shocks. the
study conclude that the central bank of Nepal should adopt a forward-looking and rule-
based monetary policy framework to enhance macroeconomic stability and credibility.

Nepal Rastra Bank (2022) analyzed monetary policy 2022/23. The main objective of
this study was to maintain stable economic conditions and prevent price pressure
resulting from excessive monetary expansion and to examine the international and
domestic macroeconomic situation, the financial sector situation, and the progress of
the monetary policy of 2021/22. It also projects the economic outlook for 2022/23 and
sets the monetary policy framework and targets for the next fiscal year. By analyzing
the evidence the study found that the NRB aimed to address the macroeconomic
scenario of the economy and promote economic recovery. The study conclude that the
monetary policy for 2022/23 will be expansionary and accommodative, with the aim of
supporting the maintaining price and financial stability, and enhancing financial access
and inclusion.

9
 Table 1
Summary Table of Literature Review

S.N. Author and Objectives Findings

Year

Bade and To investigate the To find that countries with

1
Parkin (1980) relationship between more independent central banks
central bank laws and tend to have lower inflation
monetary policies across rates, lower money growth
different countries. rates, and more stable exchange
rates.

Barro and To analyze the trade-offs To show that under discretion,

2
Gordon (1983) between rules and the equilibrium inflation rate
discretion in monetary and money growth rate are
policy, and to examine higher than the optimal ones,
the role of reputation in and that reputational forces can
sustaining a discretionary mitigate this inefficiency by
equilibrium. making the policymaker behave
more like a rule.

Blinder (1998) To execute this strategy; The book explores various

3
acquiring appropriate aspects of central banking,
information does not pose including, policy tools and
much of a problem for strategies, and the challenges
macro-policymaking. faced by central banks in
practice.

Kassim, Majid To provide insights into The authors aim to provide

4
and M.S.A. the role of bank loans in empirical evidence on the
(2008) the monetary importance of bank loans in
transmission process, channeling monetary policy
which refers to how effects to the real economy.

10
 changes in monetary
policy by the central bank
affect the broader
economy.

Blanchard, To review the main The article discusses the need to

5
Dell’Arricia, elements of the pre-crisis reassess macroeconomic policy
and Mauro consensus, identify considering the global financial
(2010) shortcomings, and crisis. It suggests that the crisis
propose potential has challenged the pre-crisis
revisions to consensus.
macroeconomic policy
frameworks.

Gambacorta Financial factors focus The authors analyze the role of

6
and Marques- on influence the the bank lending channel in the
Ibanez (2011) functioning of the transmission of monetary
monetary transmission policy during the crisis. They
mechanism particularly likely discuss the impact of the
in periods of crisis. crisis on the stability of
financial intermediaries and the
smooth transmission of credit.

Igan, and To analyze the The article derives and

7
Pinheiro.(2011) relationship between
credit growth and bank
soundness considering
the potential two-way
causality.
estimates an interest rate rule
that approximates the way the
Bundesbank conducted
monetary policy over the
period 1975-1998,

11
 Bhattarai and To influence the money
8
Sharma. (2019) supply and interest rates.
Standing facilities
provide a means for
banks to borrow or
deposit funds with the
central bank at
predetermined rates.
The paper explores the theory,
historical context, and current
practices of monetary policy. It
may discuss the evolution of
monetary policy
implementation, and the
effective implementation. and
the of effective for achieving
the objectives of monetary
policy.

Gautam (2020) To strict capital controls, The analysis suggests that

9
the foreign currency Nepalese business cycle is
received through primarily driven by monetary
remittance inflows is policy shocks and supply
liquidated by NRB in shocks.
exchange of Nepalese
currency.

Nepal Rastra To maintain stable The NRB aimed to address the

10
Bank. (2022). economic conditions and macroeconomic scenario of the
prevent price pressure economy and promote
resulting from excessive economic recovery.
monetary expansion.

12
2.2 Data Presentation and Analysis

Central bank independence (CBI) is the degree to which a central bank can conduct
monetary policy without political interference. CBI is often measured by indicators that
capture the legal and institutional arrangements of central banks, such as their
objectives, appointment procedures, policy instruments, and accountability
mechanisms. CBI is generally considered to enhance the credibility and effectiveness
of monetary policy, especially in achieving price stability. It is a key aspect of modern
central banking, rooted in the recognition that monetary policy decisions should be
based on the best interests of the economy as a whole, rather than being influenced by
short-term political considerations.

Table 2
Dynamics of Federal fund rate target range and Inflation objective

Federal Funds Rate Inflation

Year Target Range Objective

2017 1.0% - 1.25% 2%

2018 1.25% - 1.5% 2%

2019 2.25% - 2.5% 2%

2020 1.5% - 1.75% 2%

2021 0% - 0.25% 2%

2022 1.5% - 1.75% 2%

2023 4.5% - 4.75% 2%

Source: World Bank

This table provides information on the Federal Funds Rate Target Range and the
Inflation Objective set by the U.S. Federal Reserve for the years 2017 to 2023. The
Federal Funds Rate is the interest rate at which banks lend to each other overnight. The
Inflation Objective is the target rate for inflation. In 2017, the Federal Funds Rate was
between 1.0% and 1.25%, with a 2% inflation target. Over the years, there were changes
in the interest rate targets to influence economic conditions. In 2021, the rate was
13
reduced to 0% - 0.25% due to the economic impact of the COVID-19 pandemic. By
2023, the rate increased to 4.5% - 4.75%, indicating efforts to address inflation or
economic conditions. Throughout this period, the Inflation Objective remained at 2%.

2.3 Findings

The U.S. Federal Reserve adjusted the Federal Funds Rate target range multiple times
between 2017 and 2023. Notable changes include a reduction to 0% - 0.25% in 2021 in
response to the economic impact of the COVID-19 pandemic and an increase to 4.5%
- 4.75% by 2023. Despite changes in the Federal Funds Rate, the Inflation Objective
remained constant at 2% throughout the specified period. This indicates a consistent
focus on maintaining a target rate for inflation.

The adjustments in the Federal Funds Rate are interpreted as efforts by the Federal
Reserve to influence economic conditions. For instance, the reduction in 2021 was
likely aimed at supporting the economy during the pandemic, while the subsequent
increase in 2023 might indicate a response to inflationary concerns or evolving
economic conditions.

Overall, these findings suggest that the Federal Reserve used changes in the Federal
Funds Rate as a tool to navigate and respond to economic challenges and conditions
during the specified period.

14
 CHAPTER III
CONCLUSION

3.1 Conclusion

Monetary policy plays a essential role in shaping Nepal's economic landscape. This
analysis of monetary policy is crucial for effective policy making. The report focuses
on critical aspects such as inflation merging, liquidity management, and policy
transmission mechanisms. The policy rate is intricately tied to foreign exchange
reserves, standing at 7.77 percent for the eleven months of FY 2022/23. The paper
delves into liquidity management strategies, including open market operations and
growth projections for broad money supply. The report explores adjustments in interest
rates, including the bank rate, policy rate, and deposit collection rate, to maintain
macroeconomic stability. Various operational mechanisms, like the Open Market
Operation Stabilization Fund, underscore the commitment of the Nepal Rastra Bank
(NRB) to enhance liquidity management efficiency.

The analysis extends beyond current policy measures, providing a historical context
from the 1950s to the present day, showcasing the evolution of Nepal's monetary
policy. This work stands as a significant contribution to understanding monetary
policy in Nepal, combining current policy insights with historical perspectives.
Challenges such as the ongoing conflict between Russia and Ukraine and import-
based consumption necessitate a cautious approach to monetary policy. The ability to
adjust policy rates and employ various tools demonstrates the central bank's
commitment to adapt to changing economic conditions. The growth of remittance
inflows emerges as a significant factor influencing the monetary base, highlighting the
interconnectedness of external factors with domestic economic dynamics. Central
banks’ roles expanded to include addressing financial stability issues, especially after
the Global Financial Crisis. The historical context provides valuable insights for
understanding the adaptability of Nepal's monetary policy to changing economic
paradigms. The historical context highlights the evolution of Nepal's monetary policy,
emphasizing the need for adaptive measures to address changing economic
paradigms. Policymakers must be flexible in responding to emerging challenges.

15
Policymakers need to carefully balance expansionary and contractionary measures for
economic stability. Monitoring external factors, such as conflict impacts and
remittance trends, is crucial for effective policy formulation. The limited empirical
research on monetary policy in Nepal suggests the need for continuous research
efforts. Policymakers should encourage and support research initiatives to enhance the
understanding of the effectiveness of monetary policy tools. the practical
independence the central bank enjoys in practice, considering factors like its political
and institutional environment, relationship with the government, transparency, and
accountability. The historical context provides valuable insights for understanding the
adaptability of Nepal’s monetary policy to changing economic paradigms. This
context highlights the evolution of Nepal's monetary policy, emphasizing the need for
adaptive measures to address changing economic paradigms. Policymakers must be
flexible in responding to emerging challenges.

In conclusion, the study collectively emphasize the dynamic and multifaceted nature of
Nepal's monetary landscape and the nuanced approach required for effective
policymaking. The implications highlight the complex and dynamic nature of Nepal's
monetary landscape, urging policymakers to adopt a nuanced and adaptive approach.
By carefully considering these implications, policymakers can navigate challenges,
promote stability, and foster sustainable economic growth.

16
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