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Faculty of Business - Papers (Archive)

2006

Financial

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Financial Liberalization Index For Nepal, Min B Shrestha, Khorshed Chowdhury Jan 2006

Financial Liberalization Index For Nepal, Min B Shrestha, Khorshed Chowdhury

Faculty of Business - Papers (Archive)

A financial liberalization index (FLI) for Nepal is constructed in order to show the degree or the level of financial liberalization at a particular time. FLI is calculated on the basis of principal components method following Demetriades and Luintel (1997), Bandiera, Caprio et al. (2000), Laeven (2003), and Laurenceson and Chai (2003). The index comprises eight policy components, viz, (1) interest rate deregulation (IRD), (2) removal of entry barriers (REB), (3) reduction in reserve requirement (RRR), (4) easing in credit control (ECC), (5) implementation of prudential rules (IPR), (6) stock market reform (SMR), (7) privatization of state-owned banks (PSB), and …