We can agree that there is a general consensual answer in both the policy and academic realm with regards to the normative question of how a policy should be formulated. And the answer is evidence based. It is undeniable that a policy which is backed up by evidence is most likely to produce desirable outcomes and least likely to generate any unintended consequences.
But the important question is how we generate evidence that would determine the success or failure of a particular policy. Generally, whether any policy produces desirable outcomes or not is determined by research.
A rigorous study and many a times numerous rigorous studies which investigate effectiveness of any policy in terms of its impact is the process of generating evidence. Moreover, in academia any research is reviewed and commented on by multiple experts of the field before it gets finally published and the process is demanding enough that getting it published in a good journal is in itself the proof that evidence has been generated.
However, if we take the case of Nepal, it is highly doubtful if research and evidence is the foundation of any policy formulation. Here, I want to focus on macroeconomic policy of the country in particular. One example of such a policy is the import ban on various goods following depletion of the foreign currency reserves. The government claims that imposing the embargo has led to a positive effect on foreign currency reserves. However, on the flip side, it has adversely affected government revenue. The government is unlikely to meet its revenue target for the current fiscal year. Furthermore, we cannot deny the inflationary pressure created by the embargo. Due to lack of undertaking evidence-based policy measures, the government failed to envision negative spillovers of import ban.
Lack of research
The first barrier to evidence-based policy making is lack of evidence which in turn stems from lack of research. If we look at cutting-edge research in the field of macroeconomics, we generally see central bank economists from various countries as the authors of those research papers. Moreover, central banks have set up various research centers that support enhancement of the macroeconomic research which would aid in formulating macroeconomic policies. It is so with central banks of the developed world like the American Central Bank, the Federal Reserve and the European Central bank or the central banks from the developing countries like the Reserve Bank of India.
In case of Nepal, Nepal Rastra Bank does have a research department which publishes reports and papers on various economic issues, but it seems that not enough research works are being conducted to aid policy making on various macroeconomic issues. For instance, NRB published a single paper under the working paper section in the year 2022. Likewise, we can only see two papers if we browse the NRB’s website and investigate the papers published by its research department.
Apart from the central bank, universities are the major source of knowledge generation all around the world. In Nepal, Tribhuvan University is the only university which has a dedicated economics department providing doctoral level education. Since, there is a single university teaching and conducting economic research, we can expect the quantity of macroeconomic research being undertaken to be low in scale.
Besides the number of research being conducted, the quality of the research matters as it determines whether the evidence we have generated is true or not. In order to maintain the highest level of standards in research, we need to follow the latest methods and techniques of analysis of data. The new techniques are updated upon the older techniques to cover the limitations of older techniques. Therefore, there are chances that cutting-edge techniques might well challenge the results derived from previous techniques. However, if we look at macroeconomics research published in Nepal, we can only find a few papers which use the latest methods.
Moreover, most of the research conducted by Nepali scholars does not seem to make it to top journals. Bear in mind that getting published in a top journal is considered as a validation that the research has been conducted using state of the art research technique and reviewed by multiple experts in the field. The results generated from such research could well serve as valid evidence to derive any policy implications. But, the quality of research works conducted by our universities and institutions do not meet the standards to be able to make it to the top journals. Therefore, it is highly doubtful if we can derive valid policy implications from such research.
In conclusion, academic and policy institutions in Nepal should highly prioritize research to aid evidence-based policy making in Nepal. Training students and scholars on up-to-date research methods and techniques should be of utmost priority. Funds should also be directed into research so that scholars have incentive to produce highly rigorous research works.
Ashesh Shrestha is a researcher at Samriddhi Foundation, an economic policy think tank based in Kathmandu. The views expressed in this article are the author’s own and do not represent the views of the organization. [email protected]