Sources of the Shocks on Taiwan's Macroeconomic Fluctuations: Supply or Demand

Based on the aggregate supply-aggregate demand(AS-AD) framework,a structural VAR model comprising Taiwan's real output and price variables has been estimated,with which the dynamic paths and influences of supply shocks and demand shocks on Taiwan's macroeconomic fluctuations can be investigated.The estimated outcome indicates that the response paths of real output fluctuations to supply and demand shocks accord with the AD-AS theory expectation,and output variability is mostly attributed to supply shocks either in the long run or in the short run;meanwhile,the fluctuations of price level can be explained with demand shocks predominantly.With two study samples divided in the time point between the second and the third quarter of 1998,it can be discovered that Taiwan's macroeconomic system is losing its stability,and demand shocks have more effects on real output and price variability after the time point.