The existing literature on current account¡¦s analysis of influencing factors-related issues had had extensive research achievements, but they mostly stressed the discussion of influencing factors from outside the economic body. To better understand and improve government¡¦s ability of controlling variations in current account balance in order to suit the macro economic situation through the use of nimble interest and exchange rate policies, we employ the analytical tool to examine factors that influence Taiwan's excess saving during the period from 1987Q3 to 2009Q1. We modify the current account share of GDP regression by including interest rate, exchange rate and quarterly rate of inflation to reflect the effect of current account dynamics. Empirical evidences indicate that the coefficients of the long-run relationship are significantly crucial. We apply both the linear error-correction model (ECM) and nonlinear smooth transition regression model to investigate the dynamics of current account vis-a-vis interest rate, exchange rate and the quarterly rate of inflation. and find supportings to the appropriateness of nonlinear smooth transition regression model. Furthermore, exchange rate was found having positive impact on current account balances. That is, a depreciation in the exchange rate would improve the current account and an appreciation, on the other hand, will worsen the current account. But the quarterly rate of inflation has a significantly negative effect, with an increase in the quarterly rate of inflation leading to a decrease in current account balances. Finally, from the long run cointegrating relationship, current account balances raises while the interest rate is decreasing, indicating there might exist income effect when interest rates fall. Because a fall in income reduces consumption, and increases saving, in turn, causes current account balances to rise, and vice versa. The empirical results shows all coefficients¡¦ sign can not only explain and interpret real economic phenomena, but also are consistent with theoretical expectations.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0902110-214947 |
| Date | 02 September 2010 |
| Creators | Tsai, Yeong-sheng |
| Contributors | Ching-Nun Lee, Ming-Jang WENG, Hsiu-Hsin Ko |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | Cholon |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0902110-214947 |
| Rights | unrestricted, Copyright information available at source archive |
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