A Monetary Integration Feasible For East Asian

The current international monetary situation is moving toward multi-polarization, all kinds of international currencies are facing adjustment and re-division of spheres of influence, while the regional monetary cooperation will also be a trend.In 1997, the outbreak of the Asian financial crisis have created a huge impact on the development of East Asian economies, but an international financial turmoil induced by the U.S. "sub-prime mortgage crisis" quickly sweep the world. After the first time in 10 years, the resurgence of the global financial crisis makes financial cooperation in Asia more urgent, the significance of the currency union is more prominent.The outbreak of the financial crisis highlights the lack of monetary and financial coordination and cooperation between Asian Economies in East Asia economies' development. How to strengthen monetary cooperation of regional levels, build a regional financial institutional arrangements relying on the collective strength, prevent the recurrence of the outbreak of the currency crisis and provide a good external environment for sustained and steady economic growth in East Asia in the future, has been placed in front of the East Asian economies.This paper examines whether forming an optimum currency area (OCA) is viable for the East Asian region with EU adopted as benchmarks. By incorporating foreign variables, a five-variable structural VAR model is to analyze the symmetry of economic shocks. Decomposition of the variance of shocks and impulse response analysis are used to examine the size and the speed of adjustments to shocks. The empirical results do not display strong support for forming a single comprehensive optimum currency area in the East Asian region. However, they do imply that some sub-regions such as "North East Asia" and "South East Asia" initially as their disturbances are correlated and small, and these countries adjust rapidly to shocks.With the improving of China's status in East Asia's regional monetary cooperation, the status of RMB will undergo new changes, thus sustained and stable development of China's economy and the reform of monetary, exchange rate system need to be supported by regional monetary cooperation, and also should take the background of East Asia regional currency cooperation into account. RMB should strive to become the key currency within the region through participation in the East Asian regional monetary cooperation, in order to pave the way for the internationalization of the RMB.