The Effects of Interest Rates Deregulation on Capital Allocation in Taiwan''s Manufacturing Industry
| Autor: | Shu Ling Lin, 林淑玲 |
|---|---|
| Rok vydání: | 1999 |
| Druh dokumentu: | 學位論文 ; thesis |
| Popis: | 87 In recent years, the rapid growth of Taiwan economy has resulted in several issues that have some impacts on the economic and financial environment. In order to accompany with the changing of local economic and financial condition to meet the needs of economic development, and to develop Taiwan as a regional financial center as well, both the Central Bank and the Ministry of Finance in Taiwan have actively promoted financial liberalization and internationalization policies; such as the deregulation of the banking system, the removal of interest rate controls, and the abolition of administratively determined credit ceilings, etc. These policies are proposed to improve the resource mobilization, to operate enterprises efficiently, and to enhance the allocative efficiency of industry. All of these promote the economic growth together. However, the effects of the above deregulation are not quite clear empirically. This study proposes a modified model to embed in the characteristics of financial markets in Taiwan, in which a large-scale and medium-small scale manufacturing sector as well as an organized and a curb banking market are identified simultaneously. The aim of this dissertation is to assess the effects of interest rates deregulation on the investment behavior of both large-scale and medium-small manufacturing sectors. A model is proposed to emphasize that there exists a linear relationship between deposit rate and loan rate of curb market in Taiwan empirically, based on the data from 1981 to 1997. That is,. Furthermore, the demand for curb deposits is not credit-constrained; besides, the organized deposit and credit are not substitutes for curb credit, which are all very important factors of financial markets in Taiwan. It is argued that higher interest rates would induce the selection of projects with higher rates of return, and also shows the condition under which allocative efficiency might be improved by the deregulation of interest rates in Taiwan. Thus, the average productivity of investment is raised, and also results in greater growth. The empirical results are quite consistent with the arguments of the McKinnon & Shaws'''' capital-accumulation-augmenting hypothesis and the Gupta & Lensink model, both of which argued that financial liberalization would encourage greater allocative efficiency. From 1989 to 1990, when the Taiwan banking law was revised and the ceiling and floor on lending rate were entirely removed, our government started to implement various financial liberalization reforms. The empirical evidence shows that higher deposit rates on organized market have been shifted resources from medium-small sector to the modern technological sector, in which resulted in the improvement of allocative efficiency from 0.8374 to 28.3741 since 1989. Unfortunately, the allocative efficiency declined dramatically from 28.3741 to -14.5073 from 1990 to 1991. It shows that deregulation does not always guarantee an improvement in overall allocative efficiency, when there exists a curb financial market such as Taiwan. The above empirical findings could be attributed to the followings: (a) Due to the misguided interest rate intervention policy by the government, such as the establishment of some sort of credit rationing system, Taiwan''''s financial markets are not completely deregulated. (b) The oligopoly behavior is experienced on the part of the banking and financial intermediate system, and (c) a curb-banking sector is still existing in Taiwan''''s financial markets. |
| Databáze: | Networked Digital Library of Theses & Dissertations |
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