The Impacts of Trade Relationship among Taiwan, Mainland China and South Korea on Taiwan Economy
Date Issued
2012
Date
2012
Author(s)
Ma, Yi-Jyun
Abstract
Taiwan is a small and opening economy entity, so it’s much affected by international issues. Besides, South Korea is Taiwan’s major competitor in export. The FTA between the US and Korea has strongly influenced Taiwan. If the FTA between Korea and China goes through, there will be significant impact to Taiwan. Therefore, in this paper, we mainly discuss how the relationship between cross-strait as well as Taiwan and Korea affect the Taiwan economy.
This paper builds a Taiwan macroeconomic model which consists of 82 equations and 106 variables. The sample period ranges from the first quarter in 1961 to the third quarter in 2011. Our prediction on the GDP growth rate is around 3.5% and the unemployment rate ranges from 5-5.6% with a slow upward trend in the next three years. In addition, we use the scenario analysis concerning the variations such as the trade between China and Korea, cross-strait wage levels and the currency exchange rate between Taiwan an Korea.
This paper shows that the increase of the export from Korea to China will significantly constrain the exports from Taiwan to China. Besides, the wage level in Taiwan relative to China has downside potential, and will cause the unemployment rate to rise slightly. Moreover, if the TWD depreciates against Korea Won by 10%, the export from Taiwan will rise, and the GDP will increase one percent on average in the next three years.
Subjects
China-Korea FTA
Cross-strait wage rate
exchange rate
macro-econometric model
scenario analysis
SDGs
Type
thesis
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