Study On The Effect Of The Age Structure To The Real Exchange Rate

After the financial crisis of 2008,the trade surplus of China increased gradually,therefore developed countries,especial American,accused that the manipulation and undervaluation of RMB lead to global economic imbalances and the damage of developed countries' export and employment.So the developed countries have been imposing the political pressure and trade sanctions to force RMB to rise sharply.At the same time,the research that whether the theory of purchasing power parity is established has always been a hot issue in international financial research.In the long run,if there is correlation between some economic variables and the real exchange rate,purchasing power parity is denied or needs to be revised.Therefore,it is great theoretical and practical significance to study the influencing factors and mechanism of the real exchange rate.Meanwhile,the number and proportion of China's elderly population is expected to grow rapidly in the future.Therefore,studing the influence mechanism of population age structure on real exchange rate will help us to predict the future trend of real exchange rate of RMB,so have practical significance.First,this paper use the data of the world bank database to analyse the change tendency of aging structure in the world and the main countries or regions.At present,the social total dependency ratio of China is not only lower than the developed countries-The United States,Japan and The European Union-but also lower than the average level of the world.At present,the age structure of China is beneficial to the development,so China should use this opportunity to speed up the development.However,the social total dependency ratio of China appear a point of inflexion in2010,from decline to rise.China should actively face the rising trend of social total dependency ratio.Second,this paper analyzes the real exchange rates of the currency in China,India,Japan,Korea and the United States from 2008 to 2016.The real exchange rate of the currency in different countries presents different characteristics of change.The real effective exchange rate of the RMB has been appreciating during this period,while the real exchange rate has been depreciating against the dollar.Third,in order to analyze the mechanism that age structure influence on the real exchange rate,this paper built a theoretical model including transporting cost and un-arbitrage equilibrium.The model finds that the ratio's raise of non-working age population will lead to the decrease of net experts.Because of the limitation of consumer preferences,the increase of the import conduct's kinds and the decrease of the export conduct's kinds will accompany with the raise of net experts.When the productivity is unchanged,the increase of the import conduct's kinds and the decrease of the export conduct's kinds can infer the price of productive factor rise,the general price level rise,and the real exchange rate revalue.And the increase of total natural resources rents,the increase of general government final consumption expenditure and the decrease of gross capital formation will also lead the real exchange rate's up-valuation through the same mechanism.Finally,this paper examines the theoretical result using the data from 214 countries or regions from 1980 to 2015.The results showed that the ratio's increase of0~14 years old population to 15~64 years old population,the ratio's increase of 65 years old and above population,the ratio's increase of total natural resources rents to Gross Domestic Product(GDP),the ratio's increase of general government final consumption expenditure to GDP and the ratio's decrease of gross capital formation to GDP all will lead real exchange rate's up-valuation,the empirical results fully meets the theories' anticipation.In order to test the reliability of the conclusion,we also do the robustness test,with social total dependency ratio to replace children's dependency ratio and elderly dependency ratio and with gross fixed capital formation to replace gross capital formation.The results also meet the theories' anticipation.All in all,the empirical test results all meet the theories' anticipation,which consider that any factor which cause import categories' increase and export categories' decrease(including the change of age structure)will all result in the real exchange rate's up-valuation.