An Econometric Analysis of Money Demand in Taiwan, 1950–1989

A. C. Arize

The American Economist, 1994, vol. 38, issue 1, 27-35

Abstract: This paper is an empirical study of the demand for money in Taiwan, a small open economy. Alternative hypotheses of the short-term adjustment process are tested, and the results support the error-correction adjustment process. The results further suggest, based on a battery of tests, that the estimated error-correction money demand equation is temporally stable. Focus is also given to the open-economy nature of the money demand model, and the results indicate that some measure of foreign interest rates plays a significant role in Taiwan money demand behavior. Monetary policy in Taiwan, therefore, must take into account the response of domestic money demand to changes in such factors.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:sae:amerec:v:38:y:1994:i:1:p:27-35

DOI: 10.1177/056943459403800104

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