The purposes of this study is to apply an econometric model to forecast the midterm economic growth path and to evaluate the effects about macroeconomic control policy in mainland China, The New Ten Major Construction Projects in Taiwan and the direct cross-Strait transportation links. A two-region macro-econometric model is built with model simulation being carried out. In the baseline case, Taiwan economic growth will keep in the range about 4% to 5%, the growth speed is stable upward. The growth rate of consumer price index may be over 1.5% in 2004 and 2005, and then will be gradually declining. The unemployment rate will be in the range about 4.5% to 5%. In the scenario about macroeconomic control policy in Mainland China, Taiwan wouldn’t have significant changed. It may have little benefit in the short run, however it may have some disadvantages for the long run. In the scenario about The New Ten Major Construction Projects in Taiwan, although it may gain in GDP, but the crowding out effect and budget deficit will not be ignored. In the scenario about the direct cross-Strait transportation links that may have some advantages in the short run, it will stimulate private consumption. However it will have side effect in gross fixed capital formations and may result in the rising for unemployment rate in manufacturing sectors. The “no haste, be patient” Mainland investment policy has been replaced with a less restrictive “proactive liberalization with effective management” approach. Those policies such as “Green Silicon Island”, “Guideline and Action Plans for Service Industry Development” etc. that are designed to foster the creativity and talent Taiwan should be necessary urgently and executed more flexible and efficient. As everybody knows the macro-econometrics models are based on economic theories and oriented to provide quantitative evaluation. It is designed to focus on economic issued, it would be careful to explain the results, and it is still
