The Impact Of The Real Effective Exchange Rate Movements On The Employment

As one of the core variables of open economy, the exchange rate is an importantvariable of a country’s economic activity and policy tools, and plays a decisive role in acountry’s national economy and foreign economic relationship.Exchange rate change isan important source of macroeconomic uncertainty, not only affects a country’s currentaccount, capital account and financial balance of the project, and influence a country’sforeign trade, price level, and the change of employment and other economic variables.In previous research on exchange rate movements affecting the national economy,most scholars only focus at home and abroad mainly in the external balance, namelythe balance of international payments, as well as the internal equilibrium level ofeconomic growth and price stability, while ignoring the influence of exchange ratechanges on the domestic employment. In fact, employment in the position in nationaleconomy is very important. It not only relates to the people to live and work in peaceand contentment, and relates to the stability and unity of the country. How to createjobs, resolving unemployed in the new global economy under the condition of openeconomy, is still huge challenges for each government. Employment is not only relatedto domestic policy, but also related to such factors as the economy scale and economicstructure, more affected by the exchange rate changes. Therefore in the process of theforeign and domestic research on exchange rate movements, the attention toemployment level is higher and higher.In both studies of exchange rate changes and employment relationship, the most isthe study of developed countries such as the OECD, for similar in China and other developing countries and emerging industrialized countries such as South Korea’sstudy is less, the comparative study of the developed countries and developingcountries is less. Developing countries in foreign trade dependence, as well as aspectsand so on in the world market share of characteristics, are different from developedcountries. So, despite the exchange rate changes will affect the employment of anycountry in an open economy environment, the impact on employment in developingcountries is more likely compared with the influence on employment in developedcountries. Japan, in fact, developed countries, newly industrialized countries indeveloping countries, China and South Korea, three countries in the process ofappreciation, the phenomenon of domestic jobs have declined, so its currencyappreciation is one of the reasons for their employment decline? If it is, what is thetransmission mechanism? Will the RMB and the won will step into the yen’sfootsteps? Will China and South Korea both economies because of currencyappreciation and affected by the negative? In view of this, this article selects bothbelong to the northeast Asia economic circle in China, Japan and South Korea threetypical countries as the research object, the empirical analysis of the influence ofexchange rate changes on employment in different countries. In the process, we needto solve three key problems: First, the exchange rate changes will affect their job? Ifhave an impact, will produce what kind of impact? Second, what the transmissionchannels in the middle does the impact of exchange rate changes and employmentrelations have? What is the function of transmission channels between the individual?And how to play? Third, different countries in the local currency exchange ratechanges impact on their employment, are they the same?To solve these problems, further explain the exchange rate change on theinfluence of their employment, in this paper, in addition to "Introduction " and"Conclusion and Prospect", mainly through three parts, chapter five discuss, from thetheoretical analysis and empirical test by country two Angle of view for furtherdiscussion on this question. Chapters are the main content is roughly as follows: The first chapter "Introduction", first of all, the article selected topic backgroundand research significance, and by analyzing of the relationship between exchange ratechanges and employment related research literature, looking for the breakthrough pointof the topic research, draw the outline of logical path selected topic research, analysisof exchange rate movements affect the transmission mechanism of employment, theoryforeshadowing for full text study.The second chapter,"Exchange Rate Movements Affect the Employment Theoryand Model Analysis". This chapter of exchange rate changes and the relationshipbetween the changes in employment has carried on the theoretical analysis and modelanalysis. In theory, exchange rate changes will by changing the relative prices at homeand abroad product impact on a country’s economic life in the other economicvariables. Specifically, exchange rate changes will first be reflected in their country’simport and export commodity prices, will affect their country’s import and export tradein goods flow change, nature will affect its international balance of payments andforeign exchange reserves, which affects the profits of the enterprise, ultimately affectthe demand for Labor, affect their employment. The influence of the exchange ratechanges on employment mainly through its role in the middle transmission channels, inthe short term, mainly affected by the transmission channels of foreign trade, mediumto longer term, is the main transmission channels of foreign direct investment and theallocation of resources together with the transmission channels. In order to furtheranalysis of the relationship between exchange rate and the employment relationship,this chapter next using Mundell-Fleming Model, namely the IS-LM-BP Model,simple and clearly demonstrates the exchange rate changes will impact on employment.Then use the Cobb-Douglas production function (C-D function), Klein and Triest(2000) model and Campa and Goldberg (2001) model of exchange rate movementsaffect the employment in the process of transmission channels between the role of isanalyzed.The above for the full text of the first part, the part is the theoretical basis in full.Article second part is the country of the empirical analysis part, including chapteriii "Yen Real Effective Exchange Rate Changes on the Influence of the Japaneseemployment", the fourth chapter "Won Real Effective Exchange Rate Changes Impacton South Korea’s Employment" and the fifth chapter "RMB Real Effective ExchangeRate Changes Impact on China’s Employment".This part on the basis of the above theoretical analysis and model analysis,empirical analysis, respectively, the developed countries newly industrialized countriesin Japan, South Korea and China in the three countries in developing countries. Inchapter three, first of all to an exchange rate system evolution and currencymovements in the carding and analysis, for the study of currency the real effectiveexchange rate changes impact on their employment provides important practical basisand practical background, and then analyzes the corresponding period of theiremployment. Then discussed from the point of view of Angle and the total industrycurrency the real effective exchange rate changes impact on their employment. Ingeneral the annual data is used for general quantitative analysis, the results found thatin the three countries, the currency the real effective exchange rate changes will havean effect on their jobs, and this effect is negative, namely currency the real effectiveexchange rate appreciation against the domestic employment, currency real effectiveexchange rate depreciation to favour domestic jobs. After local currency are discussedfrom the point of view of industry employment effects of real effective exchange ratechange on the domestic industry, according to the ISIC classification, manufacturingcan be divided into16industry is analyzed, the results found that the real effectiveexchange rate and currency this negative relationship between domestic employment isnot only reflected in the overall level of employment, employment in manufacturingindustry. At the same time, according to the Chinese with Japan and South Korea onthe regional difference, in the fifth chapter, in addition to the RMB real effectiveexchange rate changes on the impact of China’s overall employment and industryemployment, also examines the RMB real effective exchange rate changes impact on employment in various provinces in China, the results found that although China’s vastterritory, various provinces and cities exist great differences in economic development,but the RMB real effective exchange rate appreciation impact on employment invarious provinces in China is still a negative. Through this paper, an empirical analysisof the third chapter, four, five, we reached a conclusion that the negative impact of thereal effective exchange rate appreciation on their jobs are universal, widely used invarious countries, nothing to do with the country’s economic system and economicdevelopment level, but is associated with the transmission channels in the middle ofthe action. The higher the degree of a country’s opening to the outside world, the realeffective exchange rate changes reverse impact of the country’s employment. And realeffective exchange rate changes to their employment, the effects of industry orprovinces and cities and industry or province level of openness and productivity. So wesay, the real effective exchange rate changes impact on their employment is indirect,through different transmission channels between the common, the role of the varioustransmission channels are also different.The last part is the conclusion part of the full text, namely the sixth chapter"Comprehensive Evaluation and Policy Recommendations", summarized the mainempirical evidence of this selected topic research and the analysis conclusion, thispaper expounds the main policy meaning of the empirical study conclusion, andtargeted puts forward relevant policy Suggestions for China, points out that the localcurrency the negative impact of the real effective exchange rate appreciation of theiremployment is a common and obvious, but in different countries, under the action ofdifferent transmission channels between the influence degree is slightly different,bigger influence on the developing countries. Therefore, in view of the current RMBexchange rate rising and continued upward pressure on the current situation of Chinashould strengthen the yuan, reduce the pressure on the appreciation of the RMB,actively and steadily promote the internationalisation of the RMB, in order to reducethe negative impact of the RMB exchange rate changes on China’s job. At the same time to maintain economic growth, promote employment, and give full play to thepositive role of transmission channels between, to speed up the adjustment of industrialstructure, minimizing the adverse effects of exchange rate changes on their jobs.The seventh chapter "Conclusion and Prospect", the full text of the overallresearch contents and results are the summary of terse, and in view of the insufficiencyin the process of the full text research put forward the requirement of the furtherresearch and future research direction.