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Empirical Analysis Of The Effect Of Real Effective Exchange Volatility On The Employment Of China

Posted on:2013-10-29Degree:MasterType:Thesis
Country:ChinaCandidate:M Q GaoFull Text:PDF
GTID:2247330362971158Subject:International Trade
Abstract/Summary:PDF Full Text Request
The RMB exchange rate policy is an important policy adjustment tool in the macro economy.Since the reform and opening up to the outside world, our country’s inner and outside equilibrium hasconflicted during some period and so causes a lot of debates about the exchange rate regimes. Againstthe background of RMB appreciation and the pressure society employment has faced, to research forthe effect of exchange rate fluctuation on employment has a significant theoretical and realisticmeaning in realizing the economy inside and outside equilibrium.When a country has a higher opening-up extend, the adjustment of exchange rate will have alarger affection on this country’s economy. When the exchange rate changes, it will change the importand export of a country, then change the production and investment decision of international tradecompanies, and guide the resources to re-location between the upper and lower companies. At thesame time, it will also change the non-trade department production inside the country, and at the finalcause the adjustment of labor force requirement in the whole market.This article first summarizes the domestic and foreign researches of the exchange rate andemployment, and based on the previous research, this article analyzes the effect of exchange rate onemployment from two aspects. In the theoretical part, the related important concepts have first beenreviewed, which includes the transmission mechanism of exchange rate fluctuation. Based on it, thisarticle then analyzes the principles about how the exchange rate effects the employment, and raisesthe decision models and four channels: import and export channel, efficiency channel, resourceallocation channel and FDI channel, providing theoretical basis for the next part. In the empirical part,this article starts from Frenkel’s two-sector-model, based on which divides the non-tradable sectoraccording to industries. Then, using the annual data from1985to2009, this article constructs theVAR models with the variables, using Cointegration test and VEC models to study both the long andshort term influence of the real effective exchange rate volatility on the employment of tradable andnon-tradable sector, and then uses the Variance Decomposition method to test the causality of thevariables. The result shows: The RMB appreciation has a negative effect on the tradable departmentand non-tradable department of second industry, and benefits the third industry. The wages of thesethree departments appreciate with the exchange rate, but the later can’t explain the former at thewhole extend. Based on the empirical analysis, this article gives some advisement combined with thepractical situation of China.
Keywords/Search Tags:real effective exchange rate, employment, industry, real wage, Cointegration model
PDF Full Text Request
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