Correlation And Complementarity Between Bilateral Trade And Financial Integration In East Asia

With the deepening of the process of globalization, trade integration andfinancial integration has become an increasingly important issue. The degree ofintegration of the East Asian region as a large economic area received extensiveattention. Most of the past research indicated that although the degree of regionalintegration in East Asia obtained greater growth compared to the previous, thisgrowth is to stay with the level of globalization, rather than the East Asian regionalintegration.This article is committed to to measure integration within the East Asian regionin the past that there is a significant growth through a more detailed analysis.Theanalysis of the share of trade and financial asset trading volume share in the EastAsian indicates that the East Asian regional trade integration and financialintegration had a significant growth in the past20years. This growth is not only inthe trade of intra-regional goods and intermediate goods, holdings of financial assetsincreased significantly in the region, but also in the holdings of financial assets.The trend of growth in the East Asian regional trade integration and financialintegration makes people began to pay attention to the existence of a correlation andcomplementary between the two. This paper measured the trade intensity andfinancial intensity of East Asian to draw a more significant correlation between tradeintegration and financial integration.In the third part, the paper set the trade gravity model and financial gravitymodel to analyse the "attractive" and "repulsive force" of the explanatoryvariables.The method of measuring the existence of complementary and catalyticbetween the two integration is to add financial variables in the trade gravity modeland trade variables in the financial gravity model. The model results showed thatcomplementarity does exist between the two integration. It means that an integrationdeepened, another integration will be promoted and trade integration plays a moresignificant role in promoting financial integration.