The Relationships between Agricultural Products Trade and Economic Growth in Taiwan Based on the VEC Model

Based on timeseries data from 1985 to 2012, this paper makes an empirical research on the relationship between agricultural product trade and economic growth in Taiwan by establishing VEC model and using the methods of cointegration analysis, Granger causality test and variance decomposition analysis. The results show that there is a longterm equilibrium between agricultural product trade and economic growth in Taiwan. Each 1% increase in agricultural product exports could promote Taiwan’s economic growth by 0.3972%. The error correction mechanism transfer the nonequilibrium state of agricultural product trade and economic growth in shortterm into equilibrium gradually. In Taiwan, agricultural product exports is unidirectional Granger cause of GDP. Meanwhile, GDP also is unidirectional Granger cause of agricultural product imports. The rate of agricultural exports contribution to economic change is much higher than the agricultural imports contribution to economic change.