Taiwan initially fixed its exchange rate within a highly regulated financial system, but began to liberalise gradually and continuously from 1979. A period of loosely structured discretion gave way to monetary targeting, at first converging, and then from 2003 the consistent attainment of stationary monetary targets.


Targets and attainment



exchange rate fixed to USD, no autonomous forex market, with single change (appreciation) July 1978; monetary policy has multiple objectives, pursued mainly via interest rates within banking system dominated by domestic banks owned and controlled by government; fiscal deficit mostly well under control; monetary growth strongly affected by trade surpluses and capital inflows

augmented exchange rate fix AERF


forex market established early 1979 with rate determined in principle by panel of bank managers on basis of USD bought and sold previous day, but in practice heavily managed float; small and frequent depreciations and appreciations mostly responding to strength of USD; 1980s interest rate deregulation; money market established 1976 comes to provide market-determined interest rate, and by mid-late 1980s main monetary policy instrument is OMOs, mainly in central bank bills and CDs (repos from 1983) but also redeposits from postal savings system, in operations to sterilise large inflows; from mid-1980s central bank has targets for money supply with reserve money as operating target, targets published from 1992 but overshot that year

loosely structured discretion LSD


wide (5% band, except 6% in 1998, Asian financial crisis) converging monetary targets attained roughly in first few years and then more precisely and consistently; exchange rate moving more widely from 1997 (partly in response to Asian crisis); OMOs in CDs as main monetary instrument; financial sector reforms covering reserve requirements, OMOs, interest rates, interbank forex market, payments system; rise in market as opposed to bank financing

loose converging monetary targets LCMT


wide (4% band) stationary monetary targets consistently attained; exchange rate moving within relatively narrow range (‘dynamic stability’), balance of payments surpluses persist; continuing gradual financial sector development in areas of government bonds, forex market, interest rates, payments system, capital flows, financial infrastructure, and SME and housing finance; macroprudential measures from 2010 of increasing sophistication, designed to deter property market instability; OMOs in CDs remain main instrument of monetary policy with focus on absorbing excess liquidity and controlling bank reserves so as to sustain steady growth in monetary aggregates; from 2017 minutes of monetary policy meetings published

loose monetary targets LMT

Selected IMF references: none, no Article IV or other reports available.

Other references: Annual Reports of Central Bank of China (Taiwan), 2004-17; Central Bank of China (Taiwan) (2006); Emery (1984); Emery (1987); Shih (1996).

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