A Study On The Labor Productivity Growth And Real Exchange Rates Changes Between China And The US

Among the studies about real exchange transition trend during a country's high growth period,"Balassa-Samuelson effect"is the most influent theory from the standpoint of labor productivity factor. According to"Balassa-Samuelson effect", rapid economic growth country is accompanied by real exchange rate appreciation because of differential productivity growth between tradable and non-tradable sectors between two countries. This thesis finds out that: the"re-relative"productivity of tradable and non-tradable departs between China and the US has increased evidently from 1990 to 2006, while the real exchange rate between China and US has not shown the case, which means that the Balassa-Samuelson effect is not suitable from the intuitive experience. Thus, we use ADF Unit Root test and J-J Co-integration test to start an empirical analysis and derive a conclusion: In China, the real exchange rate does not have a stable relationship with the"re-relative"productivity between China and the US. To make analysis deeply, we use Engle & Granger (1987) two steps and J-J Co-integration method to further test the three conditions of the theory and two conditions turns out to be false, which means that in China, One price law of tradable commodities does not have a certain relationship with the real exchange, and the changes of relative productivity between tradable and non-tradable departments do not certainly lead to the non-tradable commodities'price changes. These two reasons directly lead to"Balassa-Samuelson effect"rejection in China.