The Empirical Research Of Relative Labour Productivity Affecting RMB Exchange Rate

We try to explore the internal logic of how the relative labor productivity influence the exchange rate decision from the perspective of supply and demand combining trade and non-trade sectors,which is different from the traditional research.Firstly,from the view supply,based on the Marxist exchange rate theory and the Balassa-Samuelson exchange rate model,we use the dynamic panel model to study the relative labor productivity of 10 economies and China,as well as the relative labor productivity and other variables within each economy on the exchange rate.On this basis,we try again to improve the transmission mechanism from the perspective of demand.We combine three factors which are trade balance,government consumption expenditure and household consumption expenditure,with the relative labor productivity,and then we use the VAR model to explore its influence on exchange rate.The findings found that,firstly,we find that regardless of the trade sector or nontrade sector,the improvement of labor productivity can raise the exchange rate of a country.Secondly,the economies we choose and in our country do not meet the Barcelona effect.Thirdly,the two controlled variables we use,which are the degree of openness and the growth rate of per capita GDP,also exert a certain influence on the exchange rate fluctuations.Fourthly,through the robustness test,we find that using the nominal exchange rate as the explained variable can also get the same result as the real exchange rate.Fifthly,through the model of demand channel establishment,we find that the relative increase of labor productivity in China's trade sector relative to the non-tradable sector will exert upward pressure on the RMB due to the trade surplus brought by the expansion of output.Sixthly,from the view of consumption channels,the relative increase of labor productivity will promote the increase of both household consumption and government consumption expenditure,which have crowding effect and change the consumption structure.Thus,RMB exchange rate will decline.Therefore,high-quality economic development is the key to enhancing currency value,attracting international capital and improving international competitiveness.In this process,we should speed up the transformation of the way of economic development and promote full employment.