How has financial liberalization impacted capital flow mobility in Taiwan? This paper examines Taiwan’s financial policies and their role in promoting post-war industrialization. It focuses on the process of financial liberalization and its relationship to the opening up of Taiwan’s capital account, viewed as the final reform stage. The author uses the conventional interest rate parity method to compare capital flow mobility before and after mid-1987, a watershed moment when Taiwan deregulated foreign exchange control. While the results show only slight improvement in capital flow mobility after mid-1987, the author argues that the interest rate parity method may be inadequate for testing capital mobility in Taiwan’s case. This research provides a nuanced perspective on Taiwan's financial liberalization process. By examining government measures over time, the paper suggests that Taiwan's financial markets have become increasingly open and market-oriented, contributing to a better understanding of financial development in the region.
Focusing on Taiwan's financial liberalization, this paper is relevant to Review of Pacific Basin Financial Markets and Policies. The research contributes to the understanding of financial development and policy in the Pacific Basin region, making it well-suited for this journal.