Study Design And Effect Of The East Asian Financial Cooperation System

The 1997-1998 Asian financial crisis surfaced the facts such as the increasing economic interdependence leading by financial integration between countries in Asia, the regional financial stability as a public good and the common structural financial problems facing East Asian Economies. Therefore, the regional monetary and financial cooperation has become a significant tool for crisis prevention and management and financial stability enhancement. On the basis of the reference on the existing proposals for monetary and financial cooperation in East Asia, this dissertation defines the scope of this study, i.e. East Asian financial cooperation, and it designs the contents and model of cooperation in light of the analysis on the financial fragility in East Asian economies. The following chapters study empirically the effects that financial cooperation brings to the East Asia economies, the proper cooperation model in the current situation and the strategies that China should follow in East Asian financial cooperation.The chapter on financial fragility in East Asia firstly focuses in the reflections of the fragility, namely banking system fragility, underdevelopment of security markets and low degree of financial market integration. It then analyses the causes of the fragility and how the fragility can evolve into financial crisis and hamper financial and economic development. Based on the analysis on financial fragility, the dissertation designs the system of the financial cooperation, whose contents include regional financial surveillance, financial supervision cooperation, Asian bond market and stock market cooperation. The studies on cooperation model include comparison of different options of cooperation models in accordance with the analysis on the economic relations within East Asian economies, finally choose ASEAN+3 as a pragmatic model in light of theoretical and empirical studies. The design of the cooperation system aims at enhancing the soundness of the banking market, expanding financial markets and promoting financial integration in East Asia. The following chapter studies the effects that financial cooperation brings, including financial stability effect, economic growth effect and risk sharing effect, thus providing a theoretical and empirical evidence for the feasibility of financial cooperation in East Asia. The dissertation finally analyses the benefits that China gains from, principles and strategies that China should follow in the financial cooperation.The findings are as follows:The causes of financial fragility lie with unsound laws and regulations, backward financial infrastructures and low degree of openness in capital markets. If the financial fragility is not controlled and mitigated, it will evolve into financial crisis and constitute obstacles to the full risk sharing and financial and economic development in East Asian economies. It is in the purpose of mitigating financial fragility and promoting economic growth that the systems of financial cooperation are designed. The empirical studies on the effects of financial cooperation show that the implementation of the above systems can promote the soundness of financial system in East Asia, the financial development and improvement of financial structure, larger and unified financial markets for the investors to share their risks, thus leading to economic stability and growth and increasing the benefits of the people in the East Asian economies.