Any hypothesis on why Nepal keeps penduluming between liquidity crisis and excess liquidity?

5 thoughts on “Any hypothesis on why Nepal keeps penduluming between liquidity crisis and excess liquidity?”

2. Well first we don’t have independent currency. If we had then we could have fluctuated the value of currency to stabilize liquidity. Second, for sake of god let people buy international government bond, with it we could control inflation by not increasing the value of real estate. People would be happy to invest in bond that earns dollar than just inflating the real estate value like mad men.

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3. Actually there’s no concrete answer to the question and even experts don’t have a concrete answer, primarily because of the sheer number of variables that come into play . The only thing we know is that the country goes through a cycle of excess liquidity and credit crunch every time which eases by itself with the central bank’s policy.

   Now people will come over and say import, government expenditures and what not. But they can only make these claims after the event has happened. No one can say prior to the event happening. For instance, saying lack of capital expenditure by the government is one cause of liquidity crisis, which might be true to some extent, but when has the government expenditures even been above par ? Yet the country is not under liquidity crunch every year. There’s a HUGE difference between predicting an event like a liquidity crunch and talking about liquidity crunch and its probable causes once liquidity crunch has taken place . Because once the event has occurred, j vande Pani will make sense . I can literally give you a handful of reasons right out of my head and make it look justifiable on why we faced liquidity crunch. Apparently these ‘experts’ are better narrating stuffs rather than predicting and this happens in all economies and all industries .

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4. Doesn’t every other country? I mean its basic central bank function to check and balance.

   Economic equilibrium almost never exists.

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5. Our Banking System Liquidity is highly sensitive to the external sector because we don’t have a reliable source of deposit creation yet we import so much, even the daily necessities. Tracking the external sector, especially the current account would help you understand the picture clearly.

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6. Central bank is getting annoying with these frequent interventions.

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