In this paper we construct a computable general equilibrium model (CGE) integrating an input-output table, national income account, and international current account to scrutinize change among industrial sectors. Our goal is to examine the impact of changes in final demand on the industrial structure of Taiwan’s economy and the impact of foreign and domestic price changes on Taiwan’s trade structure and current account payments. The model focuses on trade issues. Among five industrial sectors, three manufacturing sectors are classified as high export, high import, and low trade manufacturing respectively.
We simulate impacts of changes in tariffs, foreign capital flow, and government expenditures on Taiwan’s economy. Comparing our simulation results with those of other studies, particularly foreign CGE research, we find they are similar, in spite of the fact that the model scales, sector classifications, functional specifications, and model solutions are different. Therefore, our five-sector model can be used to simulate the operation of the Taiwanese economy.
