The Theory Of Optimum Currency Areas And East Asian Monetary Cooperation

With the deepening integration of the current world economy and finance, the issue of international monetary integration has been attracting more and more attention, and the Theory of Optimum Currency Areas is a theory about this. The theory of Optimum Currency Areas has developed for about half a century since Mundell first mentioned in 1961. Its system and content are being improved and enriched constantly. The theory can be divided into two parts according to time and the changing of economic environment——traditional and modern theory.The traditional theory of Optimum Currency Areas mainly developed in 1960s and 1970s, which focuses on discussing what kind of areas have the most possibility to build an Optimum Currency Area. It gives us several core criterions to analyze the appropriate scope of optimal currency areas, including factor mobility, product similarity, the degree of trade interpenetration, the degree of financial market integration, similarity of inflation rates, wage and price flexibility, the degree of policy integration, symmetry of the economy impact. Besides, there are also compound criterions and non-quantitative cost and benefit analysis, they have given the base of the whole theory. The traditional theory is Keynesianism, these criterions will have some cross, alternative and contradictory relationship, or even people have doubt in their effectiveness if the presuppositions are change or loosen. Then the modern theory of Optimum Currency Areas appeared since 1980s, and is accompanied with the practice of the European monetary integration. The modern theory includes statistical analysis of single standard, composite analysis of costs and benefits, general equalization analysis, monetarist and rationality anticipation, endogenous theory, network benefit, the opinion of"one market, one money". The paper gave some critical comments about the whole theory and every part of it after a general review, and summarized the drawbacks and disadvantages, trying to find the internal relationship of different parts. Finally, it pointed out the problems that should be solved in future.The greatest value of the theory of Optimum Currency Areas is that it guided the practice of the monetary integration, especially the euro, giving rise to the discussion of monetary cooperation across the world.The East Asian monetary cooperation is one of them. The paper built a theoretical system to analyze whether the East Asia is an Optimum Currency Area, including single criterion system comprised of basic criterion, referent criterion and general criterion, costs and benefits analysis compared East Asia with the Euro area, endogenous mechanism and the"anchor"problem. The paper demonstrated that the East Asian areas, especially the subregion areas,have the same characteristics with the Euro area. If the Euro area is an Optimum Currency Area, then the East Asian region, at least the subregions, have had some qualifications to carry out monetary cooperation.The path of the realization of the East Asian monetary integration can not be the same with the euro method or the dollarizing method considering the specificity of the economical and social structure. It is proper to find a subregion-based, multi-currency union path as an"East Asia path". This path should be decomposed into several stages: subregional cooperation first, then cross subregional (Growth Triangle) cooperation, cooperation between subregions until one currency is invented at last. The third part of the paper gave some advice for China on how to cooperate in the process of the East Asian monetary cooperation, that is, to promote a singe currency in"Big China", to increase RMB's fluidity in the neighbor countries and to speed up the internationalization of RMB.