Abstract: Taiwan has limited resources graphically, so 97% of primary energy source is dependent on import. Industrial sectors are the main sources to Taiwanese economic development since the 1970s, and the oil is the base of the industries, therefore, the fluctuation of world oil price will lead to the fluctuation of domestic business cycles. Besides, Taiwanese economy has highly depended on international trade; therefore the international business cycles also have influence on the domestic business cycles. Furthermore, the international trade accounts for substantial percentage of balance of international payment. Thus, the change in the international trade will also have impact on Taiwanese economy. This paper investigates the influence of international business cycles to the Taiwanese economy. Using a structural vector-autoregressive model (SVAR model) of a small open economy (OE), our SVAR model includes industry product index (IP) of three regions (Asia, Europe, and North America), world oil price, the Taiwanese industry product index and the Taiwanese trade balance. We try to understand how these factors and their variance decompositions explain Taiwanese business cycles. We chose two periods to do the analysis¡G1974:01-1984:01 and 1985:01-2002:04. To summarize, Taiwanese business cycles were much more impacted by the factors from itself. Besides, we can also say that the impact is neither from nominal nor from real variables. Domestic shocks will be more important in explaining Taiwanese economy. Taiwan has limited resource and depends on import; however, the government will control the oil price. Therefore, we conclude that the world oil price does not have huge impact on Taiwanese economy during our studying period. Asian shocks maybe have more influence than other regions on Taiwanese economy gradually during our studying period.