A Multi-model Analysis of Infrastructure-led Growth and Inflation Control in Taiwan and Government Experience in Macroeconomic Decision-Making
DOI:
https://doi.org/10.54097/tc9r2809Keywords:
Aggregate Demand, Aggregate Supply, Inflation, Interest Rate, Monetary Policy, Supply-side Policy.Abstract
This study examines the macroeconomic impact of Taiwan’s Ten Major Construction Projects (1974–1979) through the AD–AS, IS–LM, and MP–PC models. The programme was launched to ease transport congestion, reduce energy shortages, and improve infrastructure. The results show that the projects shifted both aggregate demand (AD) and aggregate supply (AS) to the right. Specifically, demand increased through enhanced investment, greater export competitiveness, higher income and consumption, and was reinforced by the multiplier effect. At the same time, supply expanded as improvements in transport, energy, and technology raised productivity and the aggregate production function. In the IS–LM model, the IS curve shifted rightward, while the LM curve remained fixed. The increase in money demand triggered fiscal expansion, which raised output but also pushed up nominal interest rates. In the MP–PC model, both MP and PC curve shifted upward, illustrating how inflationary pressures led to tighter monetary policy.
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