An Empirical Study of Taiwan's 1978-2006 Financial Development, Export, Saving and Economic Growth

Since 1978, Taiwan has implemented a series of financial liberalization-related policies, including exchange rate liberalization, interest rate liberalization, and financial and foreign exchange market liberalization. The question of whether there exists a causal relationship between financial development and economic growth has always been an important research topic for economists. Using quarterly data from 1978 to 2006, we employ the augmented Dickey-Fuller unit root test, the co-integration test, and the causality test of the vector error correction model to explore this relationship. Our study shows that economic growth and financial development/export/saving seem to have a mutual feedback influence in the long run.