A Study On The Economic Basis Of The Feasibility Of Monetary Integration In Mainland And Taiwan

For the historical reasons, there are four separate currency areas under China’s sovereignty. With the rapid development of economy in mainland, the linkages of these four regions become closer. The tightening of the real economy linkage makes the gain of the monetary integration more considerable. On the other side, the four regions across the strait have the most solid foundation of cooperation on the regionalization of RMB, while regionalization is the only way to internationalization. So it is necessary to do research on its feasibility.After the review of relevant researches on optimum currency area theory and monetary integration of the four regions across the strait, this paper analysis the feasibility of monetary integration in theory firstly on the ground of OCA theory in the third part. In part four, this paper adopts the OCA-index method to measure various OCA standards synthetically. This paper revised the OCA index model applied to the four regions across the strait and calculated the bilateral OCA index.This paper concludes that monetary integration is feasible and the cost is decreasing. The cost is different due to bilateral mechanism and trade linkage. The cost of cooperation between mainland and the other three regions tend to be lower. So, we should firmly push forward the integration of real economy in strategy to make the monetary integration more feasible, While the path to realize the integration is quite important. In last part, several policy suggestions are made.