| Summary: | 碩士 === 國立政治大學 === 國際經營與貿易研究所 === 98 === The objective of this study is to analyze the main determinants of bilateral trade across the Taiwan Straits with a view toward exploring the causes of the Taiwan’s persistent large trade surplus with China. Our empirical model differs from most previous studies in the following aspects: we construct a system of equations to examine the demand-supply relationship ; on the supply side, the effects of inward FDI, the cost of intermediate imports on Taiwan’s production and R&D innovation are considered ; on the demand side, in additional to bilateral real exchange rates and real income, this paper also considers the indirect effects of exchange rate of third countries and bilateral FDI.
The data covering January, 1996 to December, 2009 are used in our empirical analysis. The empirical evidence indicates that the bilateral real income, Taiwan’s real direct investment to China and R&D innovation have positive effects on Taiwan’s exports towards and imports from China, however, the inward FDI to Taiwan presents negative effects. As for real exchange rate, it appears that Taiwan’s export to China would increase along with the real depreciation of the NTD against the RMB. In addition, the rising relative price of the third country against the price of China would result in a negative effect of Taiwan’s export to China, representing that the goods of Taiwan and the third country are complements.
On the other hand, Taiwan’s import from China would decrease along with the real depreciation of the NTD against the RMB. In addition, the rising relative price of the third country against the price of Taiwan would bring about a positive effect of Taiwan’s import from China. This reveals that the goods of China and the third country are substitutes. Moreover, a negative effect on the import of Taiwan from China appears when the cost of intermediate imports of Taiwan increases.
In sum, this study illustrates that, in addition to real income and bilateral exchange rates, the exchange rates of third countries, FDI inflows and outflows and innovation have also played an important role in determining bilateral trade across the Taiwan Straits. It will help understand the driving forces behind Taiwan’s persistent trade surplus against China.
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