| Summary: | 碩士 === 銘傳大學 === 經濟學研究所 === 92 === Does Ricardian Equivalence Hold in Taiwan ？
Graduate：Hsiao-Wen Lu Advisor：Dr. Jane-Sue Wang
Abstract
This paper examines Ricardian Equivalence by examining whether both the aspects - the interest rate neutrality and the real exchange rate neutrality to fiscal policy - hold in Taiwan where the nominal exchange rate and international capital flows are still basically under the control of the monetary authority. The empirical model based on an integrated open macroeconomic IS-LM-BP model, using the studies of Monadjemi & Kearney (1991) and Kamas (1986), which in turn could be viewed as a simplified version of the optimizing intertemporal models, is used to examine the Ricardian Equivalence Theorem through the neutrality of the domestic interest rate and the real exchange rate towards fiscal policy in a conventional light and a Ricardian light. The empirical evidence in Taiwan presented shows little support for Ricardian Equivalence due to the non-neutrality of both the domestic interest rate and the real exchange rate. Therefore, it can be concluded that fiscal policy does affect the domestic interest rate and the real exchange rate; thus Ricardian Equivalence does not hold in Taiwan.
Keywords: Ricardian Equivalence, fiscal policy, government expenditure, the interest rate and the real exchange rate
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