Urbanization, Demographic Structure And The Real Exchange Rates

The world demographic structure is changing now. In the first place, in 2010, the world population above the age of 60 is 759 million, accounting for 11% of the total population; In developed country, the proportion of the population above the age of 60 of the total population is 21.8%, while the proportion of the population below the age of 15 of the total population is 10.9%.The corresponding in developing country (exclusive of extremely poor countries) are 9.3%and 27.3%. In the future, with the increasing of the ageing population in developed countries, the world's aging degree will aggravate, some researcher predicted that the proportion of the population above the age of 60 of the world total population will reach to 50%in the middle of the 21th century. In the second place, according to UN, in 2007, the world urbanization rate was 49.4%, while those of developed and developing countries respectively were 74.4%and 43.8%. The rate of world, developed and developing countries are predicted to be 69.6%,86%and 67%in 2050. The urbanization and aging problem will affect developing countries for a long time.Studies have shown that the changing of age structure and the development of urbanization can lead to the changes of some economic factors-such as productivity, saving, consumption, capital and employment. And these economic factors relate to the long-term changeable trend of the real exchange rate. Therefore, the studying the real exchange rate from the analysis of urbanization and aging structure is very necessary. The purpose of this paper is to provide an urbanization and aging explanation to a long-term trend of real exchange rate changes.On the basis of references to researched achievement, this paper takes methods of the combination of historical and comparative study,the combination of normative and empirical research, the combination of qualitative and quantitative research to comprehensive and systematic analysis the relation of urbanization,aging and the real exchange rate, and study the influence of the world urbanization rate and the changes of the age structure in the long-term changeable trend of the real exchange rate and the impact of the Chinese urbanization and aging population to the real exchange rate of RMB to USD.The dissertation includes the following Parts:First, the paper attempts to explain the long-term developing tendency of the real exchange rate from the analysis of urbanization effect. In this paper a theoretical model is firstly built up to reflect the mechanisms of urbanization influence on the real exchange rate. The model indicates that, from both demand and supply perspectives, urbanization will have different effects on the real exchange rate through three mechanisms, which include " demand structure effect ", " factor endowment effect " and " Balassa-Samuelson effect". Besides, comparing the developed economies and developing economies, the effect of urbanization on the real exchange rate are different in terms of the channels and outcome. Further, the theoretical assumption of the relation between the real exchange rate and urbanization is tested by using the panel data of Europe and Asia.Second, in this paper a two products OLG model is built up to reflect the relation between the real exchange rate and the age structure. The model indicates that, in a economices, the changing in proportion of elderly people and younger will affect the real exchange rate through consumption. The empirical research indicates that the changes on proportion of elderly people and younger can significantly affect the real exchange rate, but the effects were different in different economices.Third, this paper predicts the age structure of China with Leslie matrix. In China, the proportion of worker will decline from 2009 to 2050. In 2005, the proportions of 0-14, 15-64 and above the age of 65 were 17.8%,73.81% and 8.43%, while in 2050, the proportions respectively were 11.34%,59.89% and 28.77%. The result indicates that, the shortage of worker will trouble China for a long time. This paper also predicts the urbanization rate of China with linear model and logistic model. The results show that China urbanization process would gradually slow down after experiencing high-speed growth in 1975-2010. The urbanization rate is expected to reach 80% in 2050.Forth, using prediction and historical data of urbanization and age structure in China, this paper fits and predicts the long-term developing tendency of the real exchange rate of RMB against the dollar. The effect of fitting with LG model has been good until 1990. It indicates that the methods with which the urbanization and age structure affect the real exchange rate of RMB has been changed. It predicts the long-term change of the real exchange rate of RMB against the dollar with cointegration model too. The result indicates that, with the decline of the proportion of the worker and the increase of the proportion of the elderly people in China, the real exchange rate of RMB against the dollar will appreciate for a long time, and it will reach the level of the 1960's until 2050.