An Empirical Study On The Impact Of Real Effective Exchange Rate Movement On China's Employment

As an important macro-policy adjustment method in the open economy, exchange rate policy plays a vital role in realizing internal and external balance. Since the reform and opening up, conflicts regarding our country's internal and external equilibrium have occurred repeatedly, this has evoked much controversy on the exchange rate and exchange rate system. Under the circumstances where RMB is in the revaluation cycle and the China's unemployment rate rises unceasingly, it is of extreme theoretical and practical significance to conduct a deep research on influences of exchange rate movement on employment to the maintenance of our country's sustainable economy growth and the stable employment.When export holds a important position in the economy, the exchange rate adjustment will affect the employment. The exchange rate affects the relative price of export products and the domestic products, then change trade department's investment decision and the resources deployment between tradable sector and nontradable sector, thus incurring changes in such department's production scales, with a result in affecting the labor force demand.This paper first summarizes the domestic and foreign researches of the exchange rate and the employment, followed by an in-depth exploration of its further studies. Based on the previous research, this paper analyzes the real effective exchange rate and China's employment problems from two perspectives.First,by adopting time series data and panel data,this paper chooses Error Correction model to study the long and short term influence of the the real effective exchange rate movement on the employment of both tradable sector and nontradable sector, we conduct a cointegration test,finding that there are significant cointegration relations between the RMB real exchange rate and the employment of both two sectors. Also we find that the depreciation of the real exchange rate will increase the employment of tradable sector, yet decrease that of nontradable sector.Second, analyzes the transmission channels of the real effective exchange rate fluctuations on employment, by adopting the provincial panel data to estimate three transmission channels (export demand channel, resource allocation channel and efficiency channel), this paper finds that real effective exchange rate affects employment, mainly through export channels, then through efficiency channels,and the resources allocation channel is the least one. The effect though export demand channel and efficiency channel is negative, but which through resource allocation channel is positive.Then at last, based on the analysis of empirical study, this paper analyzes the current situation and development trend of the employment situations in China and then puts forward the related policy recommendations.At present, the reseach of china's exchange rate and employment is more about the relationship of them, but there is almost no empirical research focusing on the transmission channels, this paper studies the transmission channels empirically, enriching the research in this area, and which features a innovation.