Welfare Gains Of Financial Integration In East Asia

The outbreak of the Asia financial crisis has brought huge economic losses to the entire East Asia region, East Asia countries recognize the urgency and importance of regional economic cooperation. The regional financial cooperation in East Asia has made some achievements since the financial crisis in1997. In today’s society, financial crisis happened frequently, international financial market is instability, a single country or region is difficult to resist the powerful impact of external risks. For the East Asia countries (regions), financial integration is a rational choice. The global financial crisis in2007/2008brings us once again alert to the financial crisis that will cause great harm to a single country or region. If there is no strong economic strength to support a country or region, it will be defeated in the next financial turmoil.Financial integration has a positive and profound impact on promoting world economic development and political stability. The paper examine the degree of regional and global financial integration of East Asia as well as the welfare gains from financial integration.Firstly, the paper analysis the internal motivation and external motivation of regional financial integration in East Asia. Then, the paper describes the regional financial cooperation and development of the regiona financial markets.Finally, the paper use the consumption risk sharing model to examine the degree of financial integration, empirical research found that the current degree of financial integration in East Asia is not high, but the degree of financial integration in East Asia is improved after the Asia financial crisis. The financial cooperation and the development of the financial markets played a important role in promoting financial integration. The paper also use the welfare gains model to analysis the benefits utility that comes from financial integration.The results show that, to improve the degree of financial integration will bring substantial welfare gains for the East Asia economies.China’s economic is increasingly more closely with the regional markets, the role of China in the East Asia financial integration is more important. Promoting monetary and financial cooperation is conducive to the growth and stability of the China’s economy, and also conducive to China to play a more active role in the economic development of East Asia.