Capital Flight in Taiwan: Empirical Evidence

• Main Authors: Hsing-Rung Ho, 何幸榮
• Other Authors: Ching-Yi Chiang
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/23896310767113056103

碩士 === 銘傳大學 === 經濟學系碩士班 === 99 === This paper examines the determinants of Taiwan capital flight using quarterly data during the period of 2000:2-2010:1. We use Residual Approach to measure the quantity of capital flight. The study also applys Vector Error Correction Model to examine the relationship of capital flight and determinants of capital flight. We answer the question of “how and to what extent''’ these factors affect capital flight. This study finds (1) Capital flight, real exchange rate, interest rate differential and inflation are cointegrated. Capital flight has a positive relationship with Interest rate differential and a negative relationship with inflation. Interest rate differential and inflation are the most important determinant of capital flight in Taiwan. (2) We used Vector Error Correction Model to distinguish between the short run and long run Granger causality. Inflation has a feedback in the short run to changes in capital flight. Interest rate differential hasn’t a feedback in the short run to changes in capital flight. (3) From the analysis of Impulse Response and Variance Decomposition, we find interest rate differentials and inflation account for a larger proportion of capital flight variations. The response of capital flight to interest rate differential is positive and response of capital flight to inflation is negative.