Real Effective Exchange Rate Changes On China's Employment Impact Of Empirical Research

On July 21, 2005, the Chinese government had adjustted the RMB exchange rate and the exchange rate formation mechanism. The RMB exchange rate system was from pegging a single, adjusted to a market-based. The reference to a basket of currencies to regulate the managed floating exchange rate system, the 2% appreciation of the renminbi against the dollar today. The current stage, China is facing greater pressure on employment. This makes China is carrying out a reform of the exchange rate while maintaining stability in the level of employment is more important to the economic and social significance. Therefore, the study of the employment impact of the RMB exchange rate is an important theoretical and practical significance.Based on the previous research, from the area of demand for labor to introduce three transmission mechanism of exchange rate fluctuations on employment ,fluctuations in the exchange rate of domestic export enterprises, foreign-invested enterprises, which are three ways to influence domestic industrial employment, also made a presentation of the three pathways. In the next model, the first in this production function on the basis of export enterprises, establish a simple model of demand for labor export enterprises in the short term. Model analysis shows that when the exchange rate is highly stable, the domestic employment situation not only by enterprises discount, production function of internal factors such as the ratio between capital and labor, but also from wages, interest rates and productivity impact. Then, we set up a domestic labor supply with a view to the inter-individual optimal modeland the model of the real exchange rate, productivity and real interest rates impact on employment. When consumers have concluded that the relative risk is relatively large (small consumer cross-elasticity of substitution),increased productivity and the real exchange rate appreciation will reduce employment, The discount rate represents the actual time of rising interest rates will increase employment. If a relatively small degree of risk aversion (consumption of large cross-elasticity of substitution), it will be the opposite conclusion. Taking into account China's current relatively greater degree of risk aversion, it is expected that the real exchange rate appreciation will reduce employment, productivity would reduce employment.Finally, the empirical analysis of China from 1980 to 2004, this theory has been verified. RMB exchange rate, productivity, the actual rate of change will affect employment and wages. RMB revaluation will reduce employment, in the long run, Chinese consumers there is a downward trend in the relative degree of risk aversion. Therefore, this should not overestimate the negative impact of the appreciation of the RMB on China's Employment.