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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 12, No. 3, pp.271-294
ISSN: 1225-0279 (Print)
Print publication date 31 Aug 1999
Received Feb 1999 Revised Jul 1999

The U.S. and Taiwan Trade Balance Revisited: A Comparison of the Instrument Variable and the VAR Models

Bwo-Nung Huang ; Soong-Nark Sohng ; Chin-Wei Yang
Professor, Department of Economics, National Chung Cheng University, Chia-Yi, 621, Taiwan, Tel: +886-5-2720411, Fax: +886-5-2720816 ecdbnh@ccunix.ccu.edu.tw
Professor, Department of Economics, Clarion University of Pennsylvania, Clarion, PA 16214-1232, USA, Tel: +1-814-226-2632, Fax: +1-814-226-1910 sohng@mail.clarion.edu
Professor, Department of Economics, Clarion University of Pennsylvania, Clarion, PA 16214-1232, USA, Tel: +1-814-226-2609 yang@mail. clarion.edu

JEL Classification: F32, F41

Abstract

The single factor that lies at the core of Taiwan's remarkable economic growth is sustained export growth. During the past twenty-five years, the balance of trade between the U.S. and Taiwan has its share of volatility. Taking variables from different theories, we employ the instrument variable and the VAR model to dissect the problem. It ought to be pointed out that the private sector interest rate instead of the official rate plays a key role in the model. The substantial investment in mainland China from Taiwan has distorted the trade balance picture.

Acknowledgments

Financial support from National Science Council of Taiwan (#NSC85-2415-H194-004) is gratefully acknowledged, as is typographical assistance of Ms. C. J. Lin. Usual caveats apply.

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