Working Paper: NBER ID: w29298
Authors: Douglas A. Irwin
Abstract: Taiwan was perhaps the first developing country to adopt an export-oriented trade strategy after World War II. The factors usually associated with big shifts in policy—a macroeconomic crisis, a change in political power or institutions, lobbying by export interests, pressure from international financial institutions—were not present; it was ideas that were key. In 1954, economist S. C. Tsiang proposed that Taiwan boost export earnings rather than squeeze import spending to deal with its chronic shortage of foreign exchange. He recommended a currency devaluation to establish a realistic exchange rate and a market-based system of foreign exchange allocation to end the inefficient rationing by the government. Four years later, a leading policymaker, K. Y. Yin, fought for the adoption of Tsiang’s proposal, helping clear the way for Taiwan’s phenomenal growth in trade.
Keywords: No keywords provided
JEL Codes: F13; F31; N75
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| economic ideas of S.C. Tsiang and T.C. Liu (P39) | policy changes in Taiwan's trade regime (F13) |
| overvalued exchange rate (F31) | excess demand for foreign exchange (F31) |
| excess demand for foreign exchange (F31) | government-imposed rationing (D45) |
| government-imposed rationing (D45) | limited trade opportunities (F19) |
| devaluation of the currency (F31) | growth of exports (F10) |