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Taiwan be called ¡§Taiwan¡¦s miracle¡¨ after World War II, the important factor is the accumulation of human capital . We use the model of Lucas(1988) and the definition of human capital by Whang and Zhao(1997) to re-examine the relationship between the human capital and economic growth in Taiwan. The research not only uses the Johansen¡¦s Maximum Likelihood Estimation (MLE) to make cointegration relation numbers and cointegration vectors but also use the stochastic cointegration developed by Harris, McCabe and Leybourne ( 2002, 2003 ) to re-examine the relationship between human capital and economic growth in Taiwan. Conclusion of the research, there¡¦s one cointegration vector existed by the Johansen¡¦s cointegration test . We found the stochastic cointegration exist between the human capital and economic growth in Taiwan, but not exist the heteroscedastic cointegration. Besides we recognize the the positive relationship between the human capital and economic growth in Taiwan and estimate the contribution rate 18% of human capital.

There are gradually prosperous trades in foreign exchange markets, agents could hedge, speculate and arbitrage in markets. Market efficiency and whether future spot rates could be predicted by forward rates are worthy of investigate. Hakkio and Rush (1989) demonstrated that cointegration is a necessary condition for market efficiency hypothesis, so that the examination of cointegration to investigate the long-run relationship between the spot rates and forward rates is important. We consider a new method -- stochastic coinegration which contains heteroscedastic and stationary cointegration, to re-examine the relationships between spot and forward rates. The feature of stochastic cointegraion is that the cointegrating residuals contain the integrated of order one process and heteroscedastic integrated process. However the special residuals would stochastically trendless over time, so that the spot rates and forward rates has long run equilibrium relationship. Conclusively, the future spot rates empirically are stochastic (and conventional) coinegrated with forward rates in Taiwan, Japan, and Singapore.

In the system of Taiwan, if the demand function is given, then the Central Bank can improve economic growth and steady price by controlling the money supply. In fact, true money demand is unknown, so focal point of my paper is to estimate trading money demand function of Taiwan. First, I get that real income, real M1B, and nominal rate are integrated of order 1 processes by using Augmented Dickey-Fuller test (ADF test) , Phillips-Perron test (PP test) , and Ng-Perron (NP test) . In the conventional model of Engle and Granger (1987) , I use Johansen¡¦s (1988, 1991) maximun likelihood method to estimate co-integrating vector. The result is the same with Ching-Nun Lee (1996) . In the conventional model of Engle and Granger, a linear combination of individually I(1) series becomes I(0). Series have cointegration, but their linear combination is not I(0). Therefore the conventional model of Engle and Granger does not encompass all non-stational economic models. Harris, McCabe, and Leybourne (2002) provided the stochastic cointegration. The stochastic cointegration allows that a linear combination of individually I(1) series is not I(0). Therefore, my paper also uses stochastic cointegration to test trading money demand of Taiwan. The result is real M1B, real income, and one month rate have stochastic cointegration.

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.