Determinants of Taiwan’s US Dollar Deposits Effects of Events and Policy
Date Issued
2008
Date
2008
Author(s)
Tseng, Chih - Sheng
Abstract
Due to the financial liberalization, globalization development and serious problem of assets outflow in Taiwan, I would like to discuss the determinants of US dollar deposits. Demand decides the US dollar deposits’ investment balance in Taiwan. The motif for investors to hold is high return of investment and risk aversion. In addition to measuring the national and overseas stock markets, interest rate, price level, productivity and exchange rate in Taiwan, I also find out some results by regressive function to see if the motivation of holding foreign currency for investors is obvious. . Return of investment: The main factors of affecting foreign currency’s deposit are Taiwan stock index, Hong Kong Hang-Seng index and the movement of US dollar deposits in the former period.. Risk aversion: Investors will choose to hold foreign currency because of avoiding the risk. Because US dollar deposit is not the money with high liquidity, holding too much foreign currency will cause the deflation. The authority needs to improve domestic investment environment through monetary policy and financial policy to induce investors to reduce holding US dollar deposits. Here are the results after experimenting regressive function whether the authority can improve assets outflow issue with financial policy especially when investors increase their holding of foreign currency due to the domestic emergencies. (3) Expansionary fiscal policies will increase the amount of US dollar deposits. During the period time of serious events happened, fiscal policies don’t work efficiently on diminishing the fund transferred into foreign deposits.4) Expansionary monetary policies will increase the amount of US dollar deposits. During the period time of serious events happened, monetary policies don’t work efficiently on diminishing the fund transferred into foreign deposits.eywords : US dollar deposits, Cross Effect, Interest Rate Parity, Impact of Events, Dummy Variable for Events.
Subjects
US dollar deposits
Cross Effect
Interest Rate Parity
Impact of Events
Dummy Variable for Events
Type
thesis
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