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Exploring the Root-Leaf Relationship between the Manufacturing and Financial Services Industry in Taiwan

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Author Info

  • Chin-Chen Chien

    ()
    (Graduate Institute of Finance, National Cheng Kung University, No. 1, University Road, Tainan City 701, Taiwan)

  • Cheng-Few Lee

    ()
    (Department of Finance, Rutgers University, 94 Rockafeller Road, Piscataway, NJ 08854, USA)

  • Ya-Yun Cheng

    ()
    (Department of International Business Management, Hsiuping Institute of Technology, No. 11, Gongye Rd., Dali City, Taichung County 412-80, Taiwan)

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    Abstract

    We employ the concept of Granger causality to investigate the root-leaf relationship between the manufacturing and financial services industry in Taiwan's economy. Our empirical results show that manufacturing led finance for the last half century, which is consistent with the pattern of other emerging economies. However, the liberalization of the financial services industry in the 1980s changed the relationship from "manufacturing leads, finance follows" to a feedback system. Accordingly, the financial services industry should play a more important role than previously for Taiwan to maintain its economic growth.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Review of Pacific Basin Financial Markets and Policies.

    Volume (Year): 11 (2008)
    Issue (Month): 04 ()
    Pages: 493-509

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    Handle: RePEc:wsi:rpbfmp:v:11:y:2008:i:04:p:493-509

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    Related research

    Keywords: Error correction model (ECM); Granger causality; economic growth;

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