The Analysis Of RMB Real Exchange Rate-from The Perspective Of Demographic Dividend

Since July21th,2005, the central bank announced the RMB exchange rate reform thatthe RMB exchange rate would adopt managed floating exchange rate system based on marketsupply and demand with reference to a basket of currencies. Along with the pressure fromAmerica, Korea and Japan and other developed countries, the exchange rate issue becomes apolitical problem and the war of trade and currency was suddenly inspired, which hinder thepace of recovery of china in the post-crisis era. These years the RMB exchange rate continuesto appreciate. These factors make the RMB exchange rate become the focus. Therefore,studying the factors which affect the RMB exchange rate will help us understand and getmore knowledge of the mechanism of the formation and the variation of the exchange rate.There are a lot of factors which affect the exchange rate including the interest rate, thebalance of payments, the inflation, the economic growth rate, the fiscal deficits and thepsychological expectation of investor and so on. This paper attempts to study the RMBexchange rate from the point of view of population age structure. Firstly, the paper study thegeneral theoretical analysis that how the population age structure affects the real exchangerate of RMB; secondly the paper make an empirical analysis of the effects of the populationage structure on the RMB real exchange rate; thirdly, the paper puts forward somecorresponding policies and proposals. This paper attempts to take advantage of the unit roottest, cointegration test and other modern measurement technology to study the relationshipbetween the real exchange rate and population age structure between China and the UnitedStates. We have found evidence that the age structure has significant explanatory power onthe real exchange rate. The demographic dividend will soon disappear; the Lewis turningpoint has already arrived. In these cases, the paper will predict the trends of the RMBexchange rate and give some relevant recommendations based on the aforementionedtheoretical and empirical research.Based on the empirical tests and analysis, we draw the main conclusions of this paper asfollows:(1) This paper found that there is a long-term equilibrium relationship between the RMB realexchange rate and population age structure. Compared with the U.S., when the labor force increase by1%, the Sino-US real exchange rate depreciated by11.58percent. The effect ofdemographic dividend on the real exchange rate from the perspective of demand is moresignificant. The demographic dividend makes the RMB real exchange rate have a depreciationtendency.(2) It’s a long-term for the population factor to affect the real exchange rate and its impactmechanism is relatively complex, including both the supply and demand side of the economic.The process of the mechanism is relatively more gradual and orderly. The study between agestructure of population and the RMB real exchange rate will helps us recognize the long-termtrend of the changes of real exchange rate.(3) We are still enjoy the “demographic dividend”, but the “demographic dividend” is aboutto disappear in a few years. Along with more and more old people in our country, the realexchange rate of RMB will face the pressure of appreciation.What’s more, it will strengthenthe expectation of appreciation of the real exchange rate of RMB.