Economics Research Institute Study Paper
Utah State University Department of Economics
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This paper explores the fundamental relationship between average monthly inflation and its variability in Taiwan between January 1971 and June 1992. Chow test results suggest significant evidence of a structural change in inflation behavior beginning in 1982; a period of economic liberalization in Taiwan. Analysis which accounts for structural change reveals that the fundamental relationship between inflation and its variability was served by policies implemented during economic liberalization in the early 1980s. In addition, ARCH and GARCH effects fail to be significant when structural change is accounted for.
Chang, Tsangyao and Fawson, Chris, "Economic Liberalization, Structural Change, and the Mean-Variance Linkage of Inflation: Taiwan's Experience" (1994). Economic Research Institute Study Papers. Paper 38.