Institutional Innovation: Monetary Integration - Analysis Of China's Internationalization Process

Financial globalization, which has tremendous impact on the world economic development, is the central segment of economy globalization. The financial crises broken out since 1 980s expose that the current international financial system and its supervisory system are not suitable to the world economic development. World economic development requires innovation of international system: currency integration. There are two ways of current integration: the process of Dollarization that is carried on in Latin American and other countries and regions; the single currency -- ECU -- of EU, which has initially fulfilled on July 1, 1999. Study of Dollarization is the basis of this dissertation, because regionalized finance and the integration of regional currency are the starting points of financial globalization and global currency integration. When Dollarization occurs between two countries with sharp economic contrast, the steady and powerful currency will drive the weak currency away. The nature of Dollarization is the substitute of currency and asserts. The degree of Dollarization can be evaluated through cash and deposit that circulated in the country. Dollarization exists extensively in Latin American countries, the transferring economies and developing countries. High inflation, institutional factors, the flow of international capitals, dollar hegemony and macro-economy imbalance are major causes of Dollarization. Dollarization influences economy positively and negatively, which includes the following aspects: on the one band, when there is financial deficit in a country, Dollanzation will intensify its inflation. It can spoil currency policies carried out by the authority. More seriously, Dollarization is regarded as the loss of economic sovereign of the country. On the other hand, Dollarization will benefit financial steadiness, more effective allocation of financial resource, the control of inflation, the growth of domestic capital market. The typical representation of Dollarization is Latin American countries. The model of Latin American Dollarization is literal, biliteral, and triliteral. The fulfillment of Latin American Dollarization is decided by the following factors: economic integration of the participants, how the United States undertaking the function of the central banks transferred by the Latin American countries, the impacts of Dollarization on the United States, and whether the countries which carry out Dollarization are willing to give up seignorage. Although Dollarization in Latin American countries is faced with various difficulties, Dollarization itself elaborates the contradiction between the rapid promotion of global economy integration and the severe backwardness of the social security system. The currency integration is the innovation of international financial system that emerges to meet the economy globalization. The central theory of currency integration is the Optimal Currency Area Theory. The fundamental factors of Optimal Currency Area are: the highly flow of production factors, the highly openness of economy, the diversity of commodity and economy, the highly integration of international finance, the similar inflation rate, as well as the policy integration. The expensive cost of currency integration is to give up tools of independent currency policy. The biggest benefit of currency integration is that it has promoted the usefulness of currency. The development of European Currency Union and the launching of ECU are important steps taken for financial globalization and...