Taiwan's trade imbalance against Japan: an econometric analysis

Tai Yung Kam and Jwu-Rong Lin

Applied Economics Letters, 1998, vol. 5, issue 2, 101-104

Abstract: The objective of this paper is to investigate the Granger 'causal' dynamic relationship between Taiwan-Japan trade balance (T), and four macrovariables: output (Y), exchange rate (E), money supply (M), and price index (P). The ADF Unit Root Test results show that the variables are all integrated of order I(1). The Johansen (Trace, λmax) result indicates that there is no evidence of cointegration between T and the four variables. The Final Prediction Error results indicate that there is evidence of a unidirectional causal relationship between T and M, a bidirectional relationship between T and Y only. Variance Decomposition analysis show that the exogeneity ordering of the variables is (ΔM, ΔT, ΔY, ΔP, ΔE). The impulse response analysis show that the impacts of M and Y to T are higher than the impacts of E both in short-term and medium-term. In long-term, impacts front both policies are weak and tend to be insignificant.

Date: 1998
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DOI: 10.1080/758523513

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