The Analysis Of The Effect Of Monetary Integration On International Trade

In today's trend of economic globalization, more and more trades happen among countries. While realizing trade liberalization and globalization, various countries start to seek the way of monetary cooperation in order to save transaction costs and reduce exchange rate risks, the trend of monetary integration is becoming more and more evident. Under the situation and trend, research of the effect of monetary integration on international trades is very meaningful.Now the research of the effect of monetary integration on international trades is seldom. The purpose of this paper is to explain the effect of the U.S. dollar as the world central currency and the euro as the uniform currency in the euro area monetary integration on international trades. For a long time, U.S. dollar has played a dominant role in international currency system. As to the U.S. dollar, monetary integration can be seen as its wide use in international trade, clearing and reserves. As the world central currency, U.S. dollar accelerates the pace of global monetary integration to some degree and plays a positive role in promoting the development of world trade. As it is difficult to quantify the effect of U.S. dollar on international trades and the data is also hard to obtain, the qualitative analysis method is used in this paper. Through the change of the international status of U.S. dollar, this paper discusses the different effects of U.S. dollar to the international trade, especially emphasizes on the analysis of its effect of trade deficit and the causes. On the basis of summing up the history, this paper also analyses the influence of U.S. dollar to the world trade under the situation of depreciation of the U.S. dollar. As to the effect of the euro currency to the area trade, on the basis of the theoretical analysis, this paper makes an empirical analysis through the statistics of Euro area trade data to prove that there are trade creation effect and trade diversion effect by the monetary unification. And trade creation effect is greater than trade diversion effect.On the basis of successful experience of euro currency, further discussion about the feasibility of monetary integration is stated in this paper. Firstly, through the analysis of the situation of bilateral trade and the index of dependence on foreign trade among China, Japan and Korea, this paper demonstrates that monetary integration of the three countries is feasible. There are good foundation in trade and feasibility of monetary integration among the three countries. Then, discussion of the choice of single currency is stated. A more objective evaluation of RMB and Japanese Yuan is given by comparison and the two currencies have advantages and disadvantages respectively. RMB should be ranked No.1 in the future monetary integration. At last, in this paper, it proves that trade expansion effect will be achieved possibly after monetary unification. In the long term, RMB may have the possibility to be the central currency in the area, so it should learn from the experience of U.S. dollar including ensuring the exchange rate stability and being widely used in the area trade as a means of payment and settlement in order to promote the growth of area trade and realize the RMB regionalization. But from the reality, RMB regionalization is still in the initial stage, there is still a long way to go.