Exploring the dynamic interplay of export, energy imports, capital formation and renewable energy use in Nepal

This study attempts to explore the determinants of Nepal's export performance with focus on the energy variable. The major aim of the study is to find the impact of rising use of renewable energy and growing energy import on export trade of landlocked country Nepal in the context of growing trade deficit after 1990 to till date. Auto Regressive Distributed Lag Model (ARDL) for the time series data from 1990 to 2021 reveal the positive contribution of renewable energy consumption, gross fixed capital formation and energy imports. However, exchange rate did not show the significant result. The findings further reveal the fact that Nepalese export industries are still highly vulnerable to energy shocks besides having high potential for the generation of renewable energy. Thus, increasing the speed of generation of renewable energy and transfer it for industrial use could help to minimize energy import shock, reduce energy cost and increase export competitiveness. The findings suggest that national trade strategies should be linked up with renewable energy use and policymakers should rethink about restructuring trade based exchange rate system in Nepal.