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.