Evaluating the Impact of Geographic Concentration on Nepalese Agricultural Export

Abstract

This study observed and analyzed the behaviour of Nepalese agricultural export using vector error correction model (VECM). The first part of the analysis focused on the dynamic relationship among agricultural export, geographic concentration and total agricultural production. Results of the study revealed that Nepalese agricultural export was very much dependent on the Indian markets and had positive relation with the geographic concentration index in the long run. The significant and higher error correction term indicated that the short-run fluctuations in geographic concentration and agricultural production were promptly adjusted to its long-run trend. The long-run effect of agricultural production increment on export was positive. The second part of the analysis focused on the export of niche products. The analysis in vector auto regression (VAR) form indicated that the relationship between export of niche products and geographic concentration was insignificant. Granger causality test revealed that the production granger causes export and export granger causes geographic concentration.

Keywords

Trade Diversification Export Concentration VECM Estimation JEL: F15 JEL: Q17

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