IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/11244.html
   My bibliography  Save this paper

Deflation and Monetary Policy in Taiwan

Author

Listed:
  • Ya-Hwei Yang
  • Jia-Dong Shea

Abstract

From 1999 to 2003, Taiwan faced a deflationary situation. The reasons for this deflation can be attributed to both domestic and global factors. Domestic changes including local political unrest, tensions with China, outbound investment to China, a weakened financial system, and a deteriorating government financial situation, provided the backdrop for the economic slowdown and corresponding deflation. A number of global factors, especially the bursting of the Internet and IT bubbles in late 2000 and the rise of China's economy, also heavily influenced both global and Taiwanese prices. This paper adopts a simplified aggregate demand and aggregate supply model to derive a deterministic equation of the GDP deflator (PGDP), and then applies quarterly data covering the period from 1982 to 2003 to estimate the PGDP equation using 2SLS. The empirical results are used to identify the sources of PGDP deflation in Taiwan. In addition, the phenomenon of price divergence appears since 2002 where the WPI increased and the CPI decreased. The causes of the WPI-CPI divergence are also investigated in this paper.

Suggested Citation

  • Ya-Hwei Yang & Jia-Dong Shea, 2005. "Deflation and Monetary Policy in Taiwan," NBER Working Papers 11244, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:11244
    Note: IFM ME
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w11244.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lee, Hsiu-Yun & Chen, Show-Lin, 2006. "Why use Markov-switching models in exchange rate prediction?," Economic Modelling, Elsevier, vol. 23(4), pages 662-668, July.
    2. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    3. Zatul Badarudin & Ahmed Khalid & Mohamed Ariff, 2009. "Money supply behaviour in emerging economies: a comparative analysis," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 14(4), pages 331-350.

    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:11244. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.