Recurrent government spending drives Nepal's economic growth, outpacing capital investments.
The study looked at how government spending in Nepal affects the country's economic growth. By analyzing data from 1974 to 2020, the researchers found that both recurrent (regular) and capital (investment) expenditures have a strong long-term impact on the GDP. Surprisingly, regular spending has a bigger influence on the economy than investment spending in the long run. However, there is no clear short-term relationship between government spending and GDP growth. This could be because most expenses happen towards the end of the year, causing leaks in the spending multiplier. To improve economic growth, the government should distribute expenses evenly throughout the year and fix spending leaks.