Foreign Aid and Government’s Fiscal Behaviour in Nepal: an Empirical Analysis**This paper is based on chapter 8 of my PhD dissertation, accepted by the University of Western Sydney. I am grateful to my principal supervisor Prof. Anis Chowdhury for his overall guidance and encouragement. I also would like to thank my co-supervisor Dr. Mallik for guiding me with econometrics. Thanks are also due to Prof. PN. Junankar and my external examiners for their helpful comments. However, any remaining shortcomings are mine.