Deflation and Monetary Policy in Taiwan

Edited by Ya-Hwei Yang and Jia-Dong Shea

in Monetary Policy with Very Low Inflation in the Pacific Rim

Published by University of Chicago Press

Published in print October 2006 | ISBN: 9780226378978
Published online February 2013 | e-ISBN: 9780226379012 | DOI:
Deflation and Monetary Policy in Taiwan

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This chapter discusses the deflation experience in Taiwan, and how monetary policy was conducted to mitigate the problem. Political unrest, tensions with China, out-bound investments attracted by China, and a weakened financial sector had a detrimental impact on private and foreign investment in Taiwan. The Central Bank of China's (CBC) monetary and exchange rate policies became the major policy instruments for the government to rely on. CBC's intervention is really a key factor influencing the NT-dollar exchange rate, and promoting economic growth, stabilizing domestic prices, and stabilizing the exchange rate are certainly the main concerns of the CBC in exchange rate management. Since 2004, the Taiwan economy has fortunately no longer been under the threat of deflation. Although deflation in Taiwan seems to be over, the global and domestic factors will all continue to affect Taiwan's economy in different respects.

Keywords: deflation; monetary policy; Taiwan; Central Bank of China; exchange rate; economic growth

Chapter.  12036 words.  Illustrated.

Subjects: Business and Management

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