| Summary: | 碩士 === 淡江大學 === 財務金融學系 === 85 === An important focus of modern business cycle research has
been centered oninvestigating the systematic relationship
between changes in the rate of inflationand the level of
capacity utilization in the economy. Capacity utilization canbe
measured in a variety of different way. However, a theoretically
appealingapproach is to take the output gap--the gap between
actual and potential output--as the appropriate measure of
capacity utilization. The objective of this thesis is to
estimate Taiwan's output gap and to studyits relation to the
behavior of inflation. The thesis consists of two main parts:(1)
the estimation of potential output, and (2)empirical tests of
the relation ofthe output gap to the rate of inflation. To
accomplish the first part of the thesis, an estimation methed
employed byAdams and Coe(1990) is used to estimate potential
output in Taiwan. The systemconsists of equations on prices,
unemployment,wages, and production function.Estimation is
carried out using three stage least square. In the secend
part, analyses employing both a Lucas supply function and a IS-
LMbased gap model are carried out. These analyses use OLS and
VAR metheds to investigateinflation's connection with the output
gap. Theoretically, we would expect to find apositive, direct
relation between the output gap and the rate of inflation.
Moreover,we would expect that causality would run from the gap
to the inflation rate, but notvice versa. The conclusions can
be summarized as follows: (1)The study finds that the output gap
has a significant influence on the inflation rate. That is,
increases in the output gap tend to increase inflatioin, even
after taking into account the autocorrelative structure of
inflaton. (2)The impluse response from the gap shows that
positive, gap-oriented shocks induce increases in the future
course of inflation, but not vice versa, as we would expect.
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