Abstract
This paper documents and breaks down a remarkable decline in Nepal’s exports over the 2000–2019 period. This decline is due to a collapse in the country’s top export products and is largely uniform across destinations and products. Furthermore, it is not on account of the poor global performance of the sectors Nepal was specialized in but is something more specific to Nepal. Industry-level statistics show that gross output increased in major exporting industries while value-added grew slower or declined. The increase in gross output together with the decline in exports implies a movement towards producing for domestic consumption using more imported inputs. These patterns are broadly consistent with the expected effects of the surge in remittances Nepal experienced over this time period. Remittances would cause the economy to transition towards domestic consumption and re-orient domestic production accordingly.
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