| Curently, we are confronting the most severious financial crisis since the reform and open to the outside in China. Depreciation of Renminbi and the severe situation of employment are pressing for solution. In order to reveal whether the exchange rate effect employment or not, we explain how the changes of nominal and real exchange rate affect the price level firstly, then we explain how the change of price level effect the employment. Therefore, we can derive how the changes of nominal and real exchange rate make effect on the employment through the change of price level. Conversly, we also analyze the reaction on the nominal and real exchange rate by the change of employment. Based on the theoretical analysis, we set up related model and make empirical analysis with the method of least square, distribution lag, autocorrelation, autocorrelation distribution lag and Grange causality. The empirical analyses arrive at some conclusions. Firstly, the change of Chinese price level exists in evident lag and autocorrelation effct, but the pass-through effect of RMB exchange rate is imperfect. Secondly, the Fisher Curve and negative slope Philips Curve maybe exist in China, but the nolinear Philips Curve cannot be verified, and the change of Chinese price level really have lagged and autocorrelated effect on unemployment. Thirdly, the unemployment rate of China is hardly affected by nominal and real exchange rate of RMB, it is mainly affected by the inflation rate of United States and has lagged and autocorrelated effect evidently. On the contrary, the unemployment rate of China has reaction on the nominal exchange rate of RMB and real exchange rate of RMB under the method of purchase power parity, but it has no distinct effect on the price index adjusted real exchange rate of RMB. In the end, we provide some policy suggestions on the basis of the above-mentioned theoretical and empirical analyses; meanwhile we prospect how to make further research in the future.
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