Using the monthly data between 1999 and 2007 in Taiwan, we examine the relationship of exchange rate, trade and capital flow in this paper. Granger causality test and impulse response from vector autoregressive model are employed to obtain the short-run dynamics among the variables, and Johansen cointegration test and error correction model are applied to study the long-run equilibrium. This paper reconfirms the J-curve effect in the short run and the validity of Marshall-Lerner condition in the long run. Our results also show the negative correlation of capital flow and the nominal effective exchange rate. Limited by the slow adjustment speed of trade balance, exchange rate and capital flow are the major drives back to equilibrium when the system deviates from the long-run equilibrium. Further, the capital flow variables are the leading indicators of the others in the most cases. However, different capital flow variables induce different patterns of dynamics in the short-run.

The main purpose of this thesis is to explore whether the Balassa-Samuelson hypothesis can effectively explain the long-term change of the real exchange. The recent panel unit root, panel cointegration tests and fully modified OLS are applied to examine the four tested equations that are based on the Balassa-Samuelson hypothesis. 1. Relative differential productivity between traded and non-traded sectors influences price differential in two sectors. 2. We extend the relative productivity in non-traded and traded sectors causing change in non-traded relative price into the two-country model. 3. The appreciation (depreciation) of the real exchange results from the different relative price of the two-country model. 4. The appreciation (depreciation) of the real exchange is caused by the different relative productivity of the two-country model. The data span is from 1971 to 1995, and includes 12 OECD countries. There are three main different points from the existing literatures. 1. We apply some newly developed panel unit root tests to estimate the equations based on Balassa-Samuelson hypothesis. 2. The previous documents only estimated the model of one variable, but the estimation of two variables was rare. In the equation 14 and 15, we examined the two variables in both. 3. In the calculation of the price, owing to the difficulties of collecting data from various sectors, we use a special way to measure the price. Finally, we can observe from the results of the empirical study: when productivity of the domestic sectors differentiates, that is, 1% increase in relative productivity between traded and non-trade sectors causes 0.53% increase in domestic relative prices. When it is taken into the two-country model, the increase of productivity will cause the appreciation of the real exchange rate. This can explain why in the developed countries like the U.S. and Japan, the faster increase in domestic relative productivity causes the appreciation of real exchange rates in the long run.

The main purpose of this thesis is to explore whether the Balassa-Samuelson hypothesis can effectively explain the long-term change of the real exchange. The recent panel unit root, panel cointegration tests and fully modified OLS are applied to examine the four tested equations that are based on the Balassa-Samuelson hypothesis. The data span is from 1985 to 2002, and includes 7 east asian countries. 1. Relative differential productivity between traded and non-traded sectors influences price differential in two sectors. 2. We extend the relative productivity in non-traded and traded sectors causing change in non-traded relative price into the two-country model. 3. The appreciation (depreciation) of the real exchange results from the different relative price of the two-country model. 4. The appreciation (depreciation) of the real exchange is caused by the different relative productivity of the two-country model. Finally, we can observe from the results of the empirical study: when productivity of the domestic sectors differentiates, that is, 1% increase in relative productivity between traded and non-trade sectors causes 0.28% increase in domestic relative prices. When it is taken into the two-country model, the increase of productivity will cause the appreciation of the real exchange rate.

Factors such as economical development, rapid increase in population and climate change increased electricity demand in Turkey as well as in other countries. Thus, using the correct methods to estimate short, medium and long term electricity demand forms a basis for the countries to develop their energy strategy. In this study, monthly electricity demand of Turkey is estimated. First, the effect of natural gas price and consumption to electricity demand and elasticities are searched with a simple regression model. Although, natural gas is known as a substitute of electricity, natural gas consumption and natural gas over electricity price ratio are found to be nearly inelastic. Second part includes two models and cointegration relation is investigated in nonstationary industry production index, electricity consumption per capita and electricity prices series in the first one. An error correction model is then formed with an additional average temperature variable and 12 months electricity demand is forecasted. In the second one, heating degree-days and cooling degree-days are used instead of the average temperature variable and a new error correction model is formed. The first model performs better than the second one, indicating the seasonality of electricity consumption during a year. The results of both models are also compared with previous studies to investigate the effect of different weather variables.

Abstract It has long been Taiwan¡¦s primary goal to be the Asia-Pacific financial center, especially after joining WTO, the internationalization of stock exchange, finance, and economy has undoubtedly become an inevitable trend. After Taiwan ensured the policy goals of financial liberalization, internationalization, as well as building Taiwan into an Asia-Pacific operation center in the mid-1980s, government has gradually eased financial restrictions and scrapped limits on foreign investment in the domestic stock market to expand and stabilize stock market through opening to foreign investment, and to direct investors toward rational trading through professional analysis of foreign investment capital. Although foreign capital inflow can strengthen stock market which helps accelerate economic development and internationalization; nevertheless, Mexico¡¦s and Asia¡¦s financial crisis in 1990s due to the abolishment of restrictions on capital movement, turned the policy of easing restrictions on foreign participation in the stock exchange into a double-edged sword. That is to say, while it is easier for enterprises to finance business and expand total demands to accelerate economic growth, the excessive foreign capital movement may impact domestic economy and finance, causing rapid expansion of capital and credit, inflation, as well as appreciation of real exchange rate. This study attempts to explore the dynamic effect of fundamental and stock trading factors on the stock¡¦s return rate after government eased restrictions on foreign participation in the stock exchange at the third stage of entirely opening to foreign investment. The results include that first, after the third stage of opening to foreign investment, foreign capital inflow actually causes the validity of exchange rate and monetary supply to influence stock¡¦s return rate, which changes the interpretation on the cause-and-effect of stock¡¦s return rate. Second, shortened reaction time on the impact of fundamental and trading factors on stock¡¦s return rate can rapidly reflect on stock¡¦s return rate, which helps stabilize stock market. And finally, the decomposition of forecast error variance verifies that financial internationalization indeed structurally changes how Taiwan¡¦s macroeconomic environment interprets stock¡¦s return rate. Moreover, as for trading behavior, the influence of the more speculative trading credit on stock¡¦s return rate decreases, and the foreign capital deregulation helps stabilize stock market. Key word: foreign investment, stock return, fundamental factor, trading factor, unit root, VAR

In the purpose of this study we examine the long run relationship between the flower wholesale markets in Taiwan by the theory of Park (2007). The market integration is analyzed from the viewpoint of the Law of One Price (LOP). The LOP means that the products flow from the lower price markets to the higher price ones without transaction cost utill everywhere have the same price. However, in a situation that the transaction cost exists, the assumption of LOP is questionable. When the price difference between two markets exceeds the transaction cost, there is an arbitrage opportunity. This study examine the relationship between the flower wholesale markets in Taiwan by threshold cointegration theory. The result is that there indeed exists long run relationship and threshold effects. In addition, we consider a time-varing threshold cointegration model in Park (2007), to see whether there are different arbitrage behavious depending on the season between the flower wholesale markets. Finally, we have a result that the same price gap between markets in different season will be in different regime because of the change of the value of threshold. And it causes the seasonal arbitrage behavious.

This paper reexamines the long-run real interest rate parity of the OECD countries by using the unit root test proposed by Ng and Perron (2001) and by the application of simulation to establish the small sample distribution under the null and the alternative hypothesis. By using the small sample distribution of the unit root statistics, we can make sure that first, size distortions are not the reasons contributing to the rejection of the fact that the alternative hypothesis is unit root. Second, the inference that the low power is not necessary causes the not rejecting the alternative hypothesis is correct. If still can not decide which distributions might cause the real interest difference series by comparing the unit root statistics and the relative location of the small sample distribution, we test that whether the series are asymmetric in those countries which we can not decide what kind of distributions they are by the threshold autoregression model proposed by Caner and Hansen (2001). Finally, the empirical results indicate that the RIPH holds in Australia¡BBelgium¡BCanada¡BFinland¡BFrance¡BGermany¡BJapan and Sweden whenever data frequency under linear time series model. Under quarterly data of Italy and United Kingdom and monthly data of Denmark, it turns out that the data have the traits of nonlinear time series model. Besides, the evidence of supporting the long-run real interest rate parity can not be reached and the phenomena that partial unit root exist in United Kingdom and Denmark.

Dividend Valuation Model is a well-known stock pricing model. However, many empirical studies of foreign stock markets do not support the Dividend Valuation Model; most of these studies think stock price is too volatile to explain by expected dividend. Therefore, this article would like to use Stochastic Cointegration to reexamining Taiwan stock market, and observe whether Taiwan stock market supports Dividend Valuation Model. The empirical results showed that stock price and dividends exist a positive comovements relationship in the plastic, steel, electronic, and the banking & insurance industries, but empirical results does not completely support the theoretical value of cointegration vector. Therefore, this study has not been sufficient evidence to support Taiwan stock market is efficient.

<p>This paper uses co-integration method and error-correction model to re-examine the relationship between real exchange rate and expected interest rate differentials, including cumulated current account balance, over floating exchange rate periods. As indicated by the dynamic model, I find that there is a long run relationship among the variables using Johansen co-integration method. Final conclusion is that the empirical evidence is provided to show that our error-correction model leads to a good real exchange rate forecast.</p>

During the last two decades, the European Union (EU) has experienced closer market integration through the removal of trade barriers, the establishment of a single market, and the reduction of exchange rate volatility. In addition, there have been several structural reforms in product markets designed to increase competition, monitor cross-country price differences and increase transparency. One anticipated effect of market integration is price convergence, because of the reduced potential for price discrimination across the EU. This dissertation explores market integration and price convergence in the European pharmaceutical market, which is the fifth largest industry in the EU. Since 1985, many EU directives have been adopted to achieve a single EU-wide pharmaceutical market, with the aim of enhancing the quality of life for European citizens and the European pharmaceutical industry's competitiveness and research and development capability. Using annual 1994--2003 data from five EU countries on prices of drugs used to treat cardiovascular disease, this dissertation explains how the integration process has affected cross-country drug price dispersion in the EU. The results show strong evidence of price convergence in the pharmaceutical market, with long term price differences arising from country fixed effects.