Inflation Dynamics and Monetary Policy in Taiwan

Michael C.-Y. Yang ()
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Michael C.-Y. Yang: Central Bank of the Republic of China (Taiwan)

Chapter Chapter 6 in Inflation and Deflation in East Asia, 2023, pp 89-102 from Springer

Abstract: Abstract Like many small open economies, Taiwan’s domestic prices are susceptible to international price volatility (e.g., crude oil prices) and seasonal fluctuations. Considering these transitory factors, the Central Bank of the Republic of China (Taiwan) has long-defined price stability, in accordance with the government’s macroeconomic targets of keeping inflation below 2%, as an annual growth rate of the consumer price index (CPI) in the range of 0–2% over the medium term. In the past 20 years, inflation has remained low and stable in Taiwan, with the CPI growing at an average annual rate of 1%. Because of a low and stable inflation environment, inflation expectations are well-anchored, which, in turn, helps to keep domestic inflation under control. However, the recent surge in global price levels due to the Covid-19 pandemic, supply chain bottlenecks, and the war in Ukraine, has brought inflation back to the forefront of monetary policy. Many countries have identified the elevation in price pressures as a potential threat to their economies, and Taiwan is no exception.

Date: 2023
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DOI: 10.1007/978-3-031-27949-2_6

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