Growth with Redistribution Through Liberalization with Restructuring : A CGE Policy Model of Nepal

We examine main works that use the computable general equilibrium model in measuring the impact of trade liberalization on growth and distribution. We modify the model to include prospective restructuring of the economy and its distribution mechanisms, and apply it to one of the least developed economies in Asia: Nepal. The restructured CGE model showed that the combination of import and export liberalizations generates higher growth but the distribution pattern does not become pro-poor. Liberalization under a flexible exchange rate regime, when compared to the fixed regime, can work negatively since the currency may appreciate much and eliminate the comparative advantages. We also find that a piece by piece external reform gives better economic results than implementing all external reforms together