Abstract

In this chapter, economic forecasting techniques were used to forecast the exchange rate of the New Taiwan (N.T.) dollar, given that there is a tolerable amount of favourable trade balance between Taiwan and the US. To test this monthly data for the economic variables; Taiwanese exchange rate against the US dollar, money supply, and trade balance (exports to US minus imports from US) was examined. The results were suggestive that the balance of trade would remain less than 1 billion per month, thus ensuring that the US authorities will not exert any pressures on the Taiwanese authorities for policy changes.

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