The Substitutability of Monetary Assets in Taiwan

A model of monetary asset substitutability in Taiwan during the 1970s and 1980s when the financial sector experienced some major structural changes is derived and estimated. During that period, the banking system was liberalized, a regulated money market developed, and the foreign exchange market wa...

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Bibliographic Details
Published in:Southern economic journal 1992-04, Vol.58 (4), p.975-987
Main Authors: Huang, Cliff J., Cheng, Jen-Chi, Chou, Ching-Sheng, Lin, Shun-Ying Charles
Format: Article
Language:English
Subjects:
Assets
Coefficients
Comparative studies
Economic aspects
Economic models
Economic statistics
Economic theory
Economics
Financial markets
Financial services
Foreign exchange markets
Interest rates
Liquidity
Monetary aggregates
Monetary liabilities
Monetary policy
Money
Money markets
Regulated
Regulation of financial institutions
Securities markets
Statistical analysis
Substitution
Substitution (Economics)
Taiwan
Time deposits
User costs
Utility functions
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Summary:A model of monetary asset substitutability in Taiwan during the 1970s and 1980s when the financial sector experienced some major structural changes is derived and estimated. During that period, the banking system was liberalized, a regulated money market developed, and the foreign exchange market was deregulated. Nevertheless, Taiwan's financial sector is still characterized by dualism, with the coexistence of both regulated and unregulated (curb) markets. The empirical results suggest that the high elasticities of substitution among financial assets in many developed countries may not necessarily be applicable to developing economies such as Taiwan with a dual financial system. An adequate model for the analysis of asset substitution should take into account asset flows between the regulated and unregulated markets. The analysis uses quarterly data for the period from 1971 through 1987.
ISSN:0038-4038
2325-8012
DOI:10.2307/1060233