Sensitivities of Import Demand and Export Supply in an Open Developing Economy: the Evidence from Taiwan, 1961–1994

Abstract

This study examines the time variations in the elasticities of derived demand for imports and supply of exports regarding Taiwan's aggregate production. It is to identify the long run relationship between production behavior and development process. A translog cost function model is set up to estimate the elasticity series in 1961-94. A regression model incorporating spline time setting with economic variables is built for testing the variations. Empirical results indicate that the elasticity of import demand varies with foreign income and the elasticity of export supply varies with domestic production capacity. Major exogenous events are shown to have significant impacts on production decision. [F14]

^*An early version of this paper was presented at the Western Decision Science Institute, 24th Annual Meeting, 1995. The author is indebted to Professors T. B. Lin, C. Y. Lin, J. L. Wu, and three anonymous referees for their valuable comments and suggestions. All remaining errors are the author's. Part of this study is financially supported by the National Science Council of R.O.C. in Taiwan.

^*An early version of this paper was presented at the Western Decision Science Institute, 24th Annual Meeting, 1995. The author is indebted to Professors T. B. Lin, C. Y. Lin, J. L. Wu, and three anonymous referees for their valuable comments and suggestions. All remaining errors are the author's. Part of this study is financially supported by the National Science Council of R.O.C. in Taiwan.

Notes

^*An early version of this paper was presented at the Western Decision Science Institute, 24th Annual Meeting, 1995. The author is indebted to Professors T. B. Lin, C. Y. Lin, J. L. Wu, and three anonymous referees for their valuable comments and suggestions. All remaining errors are the author's. Part of this study is financially supported by the National Science Council of R.O.C. in Taiwan.