How economic ideas led to Taiwan’s shift to export promotion in the 1950s

Douglas Irwin

No WP21-13, Working Paper Series from Peterson Institute for International Economics

Abstract: Taiwan was the first developing country to adopt an export-oriented trade strategy after World War II. The factors usually associated with big shifts in policy—a macroeconomic crisis, a change in political power or institutions, lobbying by export interests, pressure from international financial institutions—were not present; it was ideas that were key. In 1954, economist S. C. Tsiang proposed that Taiwan boost export earnings rather than squeeze import spending to deal with its chronic shortage of foreign exchange. He recommended a currency devaluation to establish a realistic exchange rate and a market-based system of foreign exchange allocation to end the inefficient rationing by the government. Four years later, a policymaker, K. Y. Yin, fought for the adoption of Tsiang’s proposal, helping clear the way for Taiwan’s phenomenal growth in trade.

Keywords: trade reform; foreign exchange; flexible exchange rates (search for similar items in EconPapers)
JEL-codes: F13 F31 N75 (search for similar items in EconPapers)
Date: 2021-08
New Economics Papers: this item is included in nep-his, nep-hpe, nep-int and nep-isf
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