Paper Industry of Taiwan has developed into an important Industry sector over the past 40 years, despite heavy dependence on foreign suppliers for their fiber requirements. The domestic consumption of paper and paper board has increased from 172,000 metric tons in 1965 to 3,103,447 metric tons in 198, with an average growth rate per annum of 13.4%. The growth rates of paper and paper consumption are 12.3% per year for 1965-1974, 11.1% per year for 1975-1984, and 10.5% per year for 1985-1988. The rapid growth in paper and paperboard consumption since 1960's can be explained by rapid economic growth of the nation. The gross national product has grown at 8.8%, 7.9% and 9.3% per year for 1965-1974, 1975-1984 and 1985-1988, respectively. In this study, we found that when real gross national products grows 1%, paper and paperboard consumption will increase by 1.096%. In other words paper and paperboard consumption increased at the same rate with Taiwan's real GNP growth over the past 23 years. The expansion of export trades has also contributed to the increase in paper and paperboard consumption, particularly, paperboard as packaging material. The country's export increased from US$455 million in 1965 to US$60.5 billion in 1988. The demand for paper and paperboard was found to be inelastic with respect to its price. The price elasticity is about-0.31. The production of paper and paperboard increased a little slower with and average growth rate per annum of 12.6% during the same period of 1965-1988. There is no close relationship between production of paper and paperboard and their prices. The reason is that investment in paper mil is capital intensive. Manufacturers can not adjust their production in time. The imports of paper and paperboard increased even faster with an average growth rate per annum of 19.5% during the same period of 1965-1988. It is found that when real gross national product increases 1%, paper and paperboard importation will increase by 2%, much higher than increase in paper and paperboard consumption. It is expected that paper and paperboard importation is going to increase in the future, so long as Taiwan's economy continues to grow. The import-domestic paper price ratio has significant impact on paper and paperboard importation. It is found that when the ratio increases 1%, paper and paperboard importation will decrease by 2%. The real interest rate has significant impact on domestic price of paper and paperboard. It is found that when real interest rate increases 1%, domestic price of paper and paper board will in crease by 0.388%. Wage rate influences, price of paper and paperboard significantly also. When wage rate increases 1%, the price will increase by 0.208%, At present, about 70% of our fiber material is from imported waste paper, Therefore, price of imported waste paper has also significant impact on domestic paper price. It is found that when price of imported waste paper increases 1%, domestic paper price will increase by 0.313%. It is quite interesting that energy price has no significant impact impact on domestic paper price. Since energy price is controlled by government and government has subsidized this Industry to some degree.