Study Of Regional Differences Of The Real Purchasing Power Of Rmb

The same amount of money has different purchasing power in different regions although a single country, i.e. different quantity of the identical commodity will be purchased by the same mount of money. Does RMB boast the same real purchasing power all through China? How much is the difference if there is any? Where are the differences originated? This thesis focuses on all these questions.The traditional theories of Purchasing Power Parity emphasized that monetary factors were the root reasons for the exchange rate of two currencies. And the modern theories of Purchasing Power Parity, especially the Harrod-Balassa-Samuelson effects, turn to research on the real economic factors. We set up a model to deduce the relationship between the changes of the domestic price ratio and the changes of wage and labor productivity efficiency.The Harrod-Balassa-Samuelson model pointed out that the relative labor productivity efficiency is the key factor which determines the real exchange rate. This thesis adjusts the assumptions of Harrod-Balassa-Samuelson effects on Chinese economic situation and works out some different conclusions.This thesis obtains the empirical text results using panel data of Chinese provinces range from1997 to 2005 and finds out that two principal factors explain the difference in RMB real purchasing power, and they are the change of wage and labor productivity efficiency.Due to the limited data and regression results, it can be concluded that the wage and labor productivity efficiency mainly cause the difference in RMB real purchasing power among different regions. In order to optimize the recourses distribution and to integrate all regions as one economic unit, we should facilitate the liquidity of producing factors, such as technology, labor and capital.