The Effect Of Exchange Rate Fluctuation On The Income Distribution Of Chinese Residents

Since the reform of the RMB exchange rate system in 2005,the RMB exchange rate has entered a new stage of elastic fluctuation.For a long period after the RMB exchange rate reform,the RMB exchange rate continued to rise.The appreciation of the RMB has had a certain impact on China's FDI inflows and the level of international trade balance.At the same time,the appreciation of the RMB exchange rate has prompted the reconfiguration of China's resources and promoted China's industrial structure has been upgraded.After about seven to eight years of the RMB exchange rate rise period,the unilateral appreciation of the RMB exchange rate will no longer continue,the RMB elasticity will further increase,and the RMB exchange rate will enter a new phase of two-way floating.The increase in exchange rate flexibility has made the impact of the RMB exchange rate on China's economy even more prominent.Since the exchange reform,a large number of scholars have begun to study the effect of exchange rate changes on economic operations.However,the current research focuses on the impact of the RMB exchange rate on China's macroeconomics.Changes in the RMB exchange rate not only affect macroeconomic aggregate indicators such as import and export,output,and prices,but also have an important impact on China's economic structural problems.Income distribution is an important part of the economic structure,and the study of exchange rate changes is relatively lacking.And most of the research focuses on the mechanism of the effect of exchange rate changes on China's functional income distribution,that is,how exchange rate changes affect the role of production factors such as land,capital and labor in the production of social products and thus affect income distribution.Compared with the study of functional income distribution in exchange rate fluctuations,the study of exchange rate changes on the income distribution of residents is even more lacking.This paper will start from the transmission mechanism of RMB exchange rate,and study the effect of exchange rate on the income distribution of Chinese residents through the data of China's household income and expenditure calculated by CFPS database.Theoretical analysis shows that the impact of exchange rate on China's residents'income distribution mainly through the following two channels,exchange rate transmission channels(consumption channels)and factor income channels.Exchange rate transmission channels(consumption channels),that is,for a given income level,changes in exchange rates affect domestic consumption prices,which in turn affect residents' consumption prices,and have an impact on household income distribution.The factor income channel of exchange rate changes,that is,exchange rate changes,affects household income by changing the relative demand for labor factors in different districts and different employment sectors.Through the influence of exchange rate changes through these different channels,we can draw the impact of exchange rate changes on the net effect of income distribution of households with different characteristics.In order to further study the actual effects of exchange rate affecting the income distribution of residents,this paper draws on the micro-research theory of income distribution,uses VAR model and time series data from 2010 to 2016 to empirically test the impact of exchange rate changes on income distribution through consumption channels.Using the fixed-effects model and the panel data of about 15,000 households in China from 2010 to 2016,a comprehensive estimate is made to analyze the intrinsic impact of RMB exchange rate on the income distribution of Chinese residents through factor income channels.Finally,through the two transfer effects of aggregated consumption channels and factor income channels,the impact of RMB appreciation on the income distribution of Chinese residents is obtained.The main result of this paper is that the appreciation of the RMB is more conducive to the income distribution of poor families,and has less impact on middle-income families.At the same time,the impact of exchange rate changes on different types of households is different.There is a significant gap in the distribution of households between rural and urban areas.The appreciation of the RMB reduces the income of urban households and increases the income of rural households.There is also a gap in the distribution of households in different age groups.Compared with young families,exchange rate appreciation will reduce the income of elderly families.In addition,exchange rate appreciation is beneficial to middle-aged and highly educated families,which has a negative impact on families with low education.In short,the appreciation of the RMB has boosted the income of poor families and reduced the income of wealthy families,thus optimizing income distribution.This article provides valuable policy advice on how to correctly handle the relationship between exchange rates and the national economy,especially income distribution.