The Realization Process And Employment Effect Of RMB Equilibrium Exchange Rate

How to realize the internal equilibrium and external equilibrium is one permanent objective of any open economy. With the deepening of the reform and opening, it has become one main subject on the way of our economic development. At present, our external economy faces double surplus of current account and capital account, and pressure of RMB appreciation; meanwhile, our internal economy faces supply and demand imbalance of labor, and pressure of realizing full employment. Therefore, the internal and external disequilibrium has become one of the important factors that challenged the stability and persistence of our economic development. Such problem had attracted great attention from politicians and economists. RMB equilibrium exchange rate, as the bridge of internal equilibrium and external equilibrium, its realization process is actually the process that how to realize internal and external equilibrium simultaneously, on the other hand, the change of exchange rate would influence employment and balance of international payment during this process. Therefore, this article made a tentative analysis of RMB equilibrium's realization process and its employment effect based on the special condition of transition economy. Firstly, the article made a review of relative equilibrium exchange rate theories and the research literatures of RMB equilibrium exchange rate. According to the various emphasizing points of different theories, we made a commentary from such aspects as the macro equilibrium analysis method, the determination of equilibrium exchange rate, the calculation of equilibrium exchange rate, the theoretical analysis and estimating analysis of RMB equilibrium exchange rate. Though there are different views on the implications of internal equilibrium and external equilibrium, through distinguishing the differences, we made some theoretical preparation for subsequent study. Secondly, the article displayed the realization process of RMB equilibrium exchange rate through analyzing the equilibrium of output market, equilibrium of monetary market and the external market, and got the determination equation of RMB equilibrium exchange rate. Thirdly, based on unemployment and capital account surplus, the article explored the inherent relationship between RMB exchange rate changes and real employment level, and found that the exchange rate appreciation or depreciation had both positive and negative influences on real employment level. Through making further comparison of positive influence and negative influence, the article concluded that the relationship between exchange rate change and real employment level might be positive or negative.On the above basis, the article discussed RMB exchange rate's employment effect, and named the condition that exchange rate induced employment increase as exchange rate's employment formation effect, and named the other condition that exchange rate caused real employment decrease as exchange rate's employment substitution effect. On the basis of the conclusion, the article showed the possible realization routes of RMB equilibrium exchange rate. Finally, as a realistic extension, the article studied the RMB exchange rate's employment effect from the empirical perspective. And the results showed that during the period of 1986-1994 and 1995-2005 the relations between RMB exchange rate and real employment level were both positive. Therefore, the equilibrium exchange rate's realizing route was depreciation from the aspect of promoting employment.Different from other studies of RMB equilibrium exchange rate, this article mainly analyzed RMB equilibrium exchange rate's realization process and employment effect which may has some defections caused by ignoring such factors as exchange-rate system reform, financial structure adjustment and Macro Policy transmission. However, it can also lead to some helpful conclusions, which are meaningful to broaden the research range of RMB equilibrium exchange rate.