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Analysis On The Feasibility Of Setting Up East Asian Monetary Union And Discussion About The Ways To Realize East Asian Monetary Union

Posted on:2006-05-17Degree:MasterType:Thesis
Country:ChinaCandidate:C ZhaoFull Text:PDF
GTID:2166360155954355Subject:World economy
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With the rapid development of the world economic integration,cooperation seems to be an inevitable way to further the relations between allnations and regions. In order to adapt to the trend of the economicglobalization and to get rid of infectivity and destructiveness of financial crisis,the countries and regions of east Asia have stronger requirements for carryingon monetary cooperation in this area than that of before. As the supreme formof monetary cooperation, whether the monetary union should be set up in thisarea is a question that different people have different views.While studying the question whether the monetary union should be set upin East Asia, first of all, we should make clear various kinds of theories aboutthe monetary union. Only by understanding the monetary union's theorydeeply, we can find the reality of the monetary union in our life. This textbegins with the reviewing of the theory of monetary union, introduces theconcept and form of monetary alliance briefly and explains the theory ofoptimum currency area. It discusses the preconditions that one country joins inthe monetary union. These preconditions includes mobility of the factor ofproduction, economic scale and degree of opening, diversify of products,integrated degree of financial market, elasticity of the price and the salary,inflation rate , the integration of the public finance , change of the actualexchange rate and various kinds of political factors ,etc. At the same time, itpoints out that decision should be made after considering the cost and incomethat the countries join in the union. If the cost is smaller than incomes, it willbe a correct choice to set up a monetary union.The realistic basis of setting up monetary union in the world is mainlyEurope currency Union at present. The establishment of European Union hasoffered a successful example for setting-up of the monetary union of East Asia.From customs union to united market, developing into European currencyunion, the route can be drawn by East Asia. As far as the principal currency inthe area is concerned, East Asian countries can consult the origin anddevelopment of European currency to set up an organization with a singlecurrency.In order to promote the rapid sound development of the economy of allcountries in the area and get rid of the puzzlement of the crisis, the East Asiancountries have already launched a series of monetary cooperation under theguidance of European experience at present. Ideas of "Asian monetary fund",the foundation of Association of South-east Asian Nations 10+3 early warningsystem, the implement of Chiang Mai Initiative and supervision mechanism ofAssociation of South-east Asian Nations are all the progresses that monetarycooperation makes. We can say that the monetary cooperation in East Asia hascreated conditions for establishing monetary union in East Asia.For the feasibility of the monetary union of East Asia, we can discuss itby some economic target system of setting up the union on one hand, and onthe other hand, we can make a research from the cost and the income of EastAsian Monetary Union.First of all, in the integrated degree of trade in the area, the real economicdata of East Asia indicates that its integrated degree of trade is already close toEuropean countries'. Secondly, in the economic opening degree, the degree ofmarket opening in East Asia improves greatly and approaches to the situationwhile establishing monetary union in the European countries. Moreover, tradestructure index does not reach the standard of Europe yet. Fourth, according topolicy goals and economic cycle, East Asian countries and regions can carryon some monetary cooperation such as joint floating exchange rate system.Fifth, to the index of economic similarity, for their economic gap is toowide, East Asian countries have not totally reached the European monetaryunion standard yet. The sixth factor is the mobility of product factor. In EastAsia the mobility of labor is relatively low, and mobility of capital is relativelyhigh. The above proves that East Asia does not still totally possess all indexesof setting up the monetary union.The cost of the monetary union is the forfeiture of the monetary policytool and exchange rate policy tool. It also includes the loss of coining tax andinflation tax, the speculative impact in transition period and current accountdeficit, etc. And the income that the East Asian monetary union may bring isthe saving of the exchange cost, the promotion of trade and investment, thefast domestic economic reform, steady prices, decrease of financial crisis. Inthe above analyses, we can conclude that it is still unripe to establish EastAsian monetary union. The setting-up of the monetary union can only be along-term goal.Because East Asian countries don't qualify to set up complete monetaryunion at present, they can only remain in the currency cooperative stage. TheEast Asian monetary union should be realized through choosing the temporaryroute. We can divide this course into 3 stages to realize at time in detail. In thefirst stage, we should set up the crisis succor mechanism, for example,bilateral or multilateral currency exchange arrangement, Asian monetary fund,etc. In the second stage, we should set up East Asian exchange rate mechanismsimilar to European Exchange Rate Mechanism. This mainly refers toexchange rate mechanism pegging to the monetary basket. All the East Asiancountries peg to Japanese yen, U.S. dollar, European dollar, etc. In this area,the currency in the monetary basket is made up of the ones outside and insidethe area. Making use of the change of the currency, we can realize the goals ofstable exchange rate and prevent the fluctuation of the exchange rate. In thethird stage, we should make East Asian countries carry out the transition to the...
Keywords/Search Tags:Feasibility
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