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Comparison of Important Laws Governing the Macroeconomies of Taiwan and China
Author(s) -
Chow Gregory C.,
Yin ShouYung
Publication year - 2018
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.12180
Subject(s) - economics , china , consumption function , consumption (sociology) , investment (military) , investment function , government (linguistics) , permanent income hypothesis , monetary economics , macroeconomics , function (biology) , affect (linguistics) , government expenditure , fiscal policy , law , production (economics) , public finance , political science , philosophy , evolutionary biology , sociology , politics , biology , social science , linguistics , market liquidity
This is a comparative study of the important laws governing the macroeconomies of Taiwan and China. The laws are concerned with consumption, investment and fiscal and monetary policies of the government. Following similar studies on China, the present paper focuses on the case of Taiwan. Using annual data from 1961 to 2014 we find that the consumption function satisfies the permanent income hypothesis of Friedman and the investment function satisfies the accelerations principle as in the case of China. Money supply does not affect GDP but government expenditure has a positive effect on consumption and a negative effect on investment. These results are opposite to those obtained for China. Explanations of the differences are given.