«Exporting Hyperinflation: The Long Arm of Chiang Kai-shek Richard C. K. Burdekin and Hsin-hui I. H. Whited* Claremont McKenna College and University ...»
15. Our procedure differs from that of Lin and Wu (1989), however, in that they did not allow for the role of capital inflows and hence considered only a four-variable system.
16. Makinen and Woodward (1989) find that this pattern is not maintained if the sample is extended from 1949 to 1953 – in which case their results indicate no causality in either direction. An important caveat, however, is that all such causality test results, including our own, remain vulnerable to the numerous potential shifts in the underlying inflation and money growth processes over the 1948-1950 period in Taiwan (Burdekin and
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1936-37 1,894 1,972 -78 1,410 1937-38 2,091 815 1,276 1,730 1939 2,797 740 2,057 4,290 1940 5,288 1,325 3,963 7,870 1941 10,003 1,310 8,693 15,100 1942 24,511 5,630 18,881 34,400 1943 58,816 20,403 38,413 75,400 1944 171,689 38,503 133,186 189,500 1945 2,348,085 1,241,389 1,106,696 1,031,900 1946 7,574,790 2,876,988 4,697,802 3,726,100 1947 43,393,895 14,064,383 29,329,512 33,188,500
Notes: All numbers are given in millions of fapi Data from August 1948 on have been converted by applying the official 3 million to 1 exchange rate between fapi and the gold yuan Note issues outstanding are end of period values.
Source: Chang (1958, pp. 16, 40, 51, 71, 84, 124, 168), Wu (1958, p. 122) and authors’ calculations.
TABLE 2: Regression Results for Taiwanese Inflation and Taiwanese Money Growth
The numbers in parentheses after the independent variables denote the lag order (if any), ***, **,* and # denote significance at the 1%, 5%, 10% and 11% levels, respectively, t-statistics are listed in parentheses below each coefficient, GMM denotes Generalized Method of Moments and 2SLS denotes Two-Stage Least Squares, J-Statistic is a goodness of fit diagnostic for GMM regressions for which R2 s and F-Statistics cannot be computed (the lower the value of the J-Statistic the better the fit), and the Chow Breakpoint Test is for a hypothesized structural break at the time of the monetary reform in August 1948.
TABLE 3: Regression Results for Capital Inflows into Taiwan from Mainland China
Inflation Differential is the difference between the inflation rate for mainland China and the Taiwanese inflation rate, and Money Growth Differential is the difference between the money growth rate in mainland China and the Taiwanese money growth rate.
(See also the explanatory Notes to Table 2.) TABLE 4: Granger-Causality Tests on the Five Variable System Causal Relationship Tested Chi-Squared Statistic ____________________________________________________________________________________________
***, ** and * denote significance at the 1%, 5% and 10% levels, respectively, the figures in brackets are the exact significance levels (P-values), and two autoregressive terms have been included in each regression to correct for serial correlation.
Taiwan Index Level