The Impact Of Real Effective Exchange Rate Change On Employment In Japan And China

As an important economic variable of open economy, exchange rate affects a country’s employment, prices and trade. And the employment relates to a country’s economic, social and political stability. When a country’s economic opens more, the influence of exchange rate changes on employment becomes bigger and bigger. How these influences work? In developed countries and developing countries, are the influences degree of the exchange rate change on employment same? With the appreciation of RMB and the appreciation pressure circumstances, how can we reduce the influence degree of the RMB exchange rate change on employment? These are all need to be studied in this paper.In the theory part, we made some theory analysis on the relationship between the exchange rate changes and employment; Then by M-F model (IS-LM-BP model) demonstrated that the exchange rate changes will affect the employment changes; And then by the Cobb-Douglas production function, we made the analyze on the transmission channels by which exchange rate changes affect the employment.In the empirical analysis part, we made some analysis on Japanese and Chinese exchange rate system reformation, exchange rate changes, employment changes and the impact of exchange rate changes on the employment during the corresponding period, which will provide practical basis and background for late econometric analysis; Then, using the annual data between 1980 and 2014 of Japanese employment and exchange rate and the annual date between 1980 and 2013 of Chinese employment and exchange rate, by Eviews6.0 software, we made VAR model to analysis the influences of real effective exchange rate change on employment. Also, we compared the transmission channels between the two countries. The results show that both in developed countries and developing countries, the real effective exchange rate appreciation has negative impacts on employment. As Chinese foreign trade dependence degree is higher, the negative influence is stronger. Through import and export trade and foreign direct investment transmission channels, the negative impact of the real effective exchange rate on employment becomes stronger. But, to different countries with different development level, the effect degrees and directions of the transmission channels are different.