Monetary cooperation among Mainland China, Hong Kong, Macao and Taiwan: based on symmetry of economic shock

The increasingly closer economic relations among Mainland China, Hong Kong, Macao and Taiwan have emerged and expanded the need for monetary cooperation. The pursuit of monetary cooperation could not only have a long-term strategic significance for the internationalising progress of RMB, but also a practical significance in boosting the mutually beneficial development of regional economy, as well as reducing financial risks and the political divergences between the two sides of Taiwan Strait. In this paper, the feasibility of monetary cooperation among Mainland China, Hong Kong, Macao and Taiwan is analysed from the perspectives of static state and dynamic trend by using the three-variable SVAR model (output, price and interest rate), state-space model and impulse-response analysis. The research finds that an overall symmetry of economic shocks from these four regions is relatively symmetrical. Besides, the restructuring speed of economic shock and the dynamic trend of the symmetry of economic shock are relatively optimistic. From the perspective of economy, it is believed that, as their trade and financial cooperation deepens, the conditions for monetary cooperation among Mainland China, Hong Kong, Macao and Taiwan, would gradually mature.