The purpose of this study is to explore the determinants and the characteristics of the economic changes of Taiwan by estimating and working an annual macroeconometric model of Taiwan. The model, estimated by the OLS method over the sample period 1953-73, consists of thirty-two endogenous variables and twenty-three exogenous variables, which is considered by six main blocks: real expenditure block, income distribution block, taxation block, production and labor block, wage and price block, and monetary block.
A test for goodness of fit of the model was performed by the final method of A. S. Goldberger, and the preliminary simulation results were pleasing. We used the model to derive some multipliers and to further analyze the factor contributions to the economic changes of Taiwan. As the concluding remarks of this study, we found with empirical evidence that (1) the foreign factors have great influence on the Taiwan economy, (2) the expansion speed of the government investment has closely followed the pace of expansion of the world economy, (3) the banking loans have played a great role in promoting the Taiwan economy, (4) interest rate and taxing policies were inert in adjusting the economic fluctuations of Taiwan, and (5) the influence of the increases in public utility prices is formidable on threatening the living cost of the people on Taiwan.
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