Linyue Li1,2

(1. School of International Trade and Economics, Central University of Finance and Economics, Beijing, China;

2.Claremont Institute for Economic Policy Studies, Claremont Graduate University, California, USA)

 

 

Abstract: This paper aims to design a framework to study the mechanism of regional monetary cooperation in four regions of China across straits (Mainland China, Hong Kong, Macau, and Taiwan), considering that monetary cooperation is a key field of regional cooperation for further integration. From the angle of the large trade volume, frequent capital movement and financial cooperation among the four regions, close economic ties indicate the overwhelming trend of monetary integration of the four areas in the long run. The analysis will be based on two perspectives: one is business cycle synchronization and the other is symmetrical economic shocks. In the long run, the GDP co-movements among these four areas are expected, while in the short run, the four areas have common business cycles. At the same time, the economic shocks of the four areas are symmetric to some degree, expectedly. After introducing the theory and empirical analysis, the paper will design the framework of the schedule, by dividing the monetary cooperation into three stages: short-term, middle-term and long-term. Based on the monetary integration experience in Europe, the concrete mechanism and the technicality in each stage will be illustrated in order to construct the basic monetary cooperation framework for the four regions across straits.

 

 

Key words: cross-strait four regions; monetary cooperation; framework; mechanism

 

JEL codes: F31, F33, F36