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

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  • A. C. Arize

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.

Suggested Citation

  • A. C. Arize, 1994. "An Econometric Analysis of Money Demand in Taiwan, 1950–1989," The American Economist, Sage Publications, vol. 38(1), pages 27-35, March.
    • Handle: RePEc:sae:amerec:v:38:y:1994:i:1:p:27-35
    DOI: 10.1177/056943459403800104
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    References listed on IDEAS

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    Cited by:

    1. Sophie van Huellen & Duo Qin & Shan Lu & Huiwen Wang & Qing Chao Wang & Thanos Moraitis, 2022. "Modelling opportunity cost effects in money demand due to openness," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 697-744, January.

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