A Model for National Income Determination in Taiwan
Following Chow (1985 and 2010) and using annual data from 1951 to 2010 for Taiwan this paper estimates a consumption function based on the permanent income hypothesis and an investment function based on the accelerations principle. The data support the permanent income hypothesis Friedman (1957) whereas the permanent income hypothesis of Hall (1978) was supported in Chow (1985 and 2010). The accelerations principle is strongly supported, as in the case of China. An explanation why the two economies have different consumption functions is given.
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- Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, December.
- Chow, Gregory C. & Wang, Peng, 2010. "The empirics of inflation in China," Economics Letters, Elsevier, vol. 109(1), pages 28-30, October.
- Chow, Gregory C, 1985. "A Model of Chinese National Income Determination," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 782-92, August.
- Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
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