The Effect of Changes in Real Exchange Rates on Employment: Evidence from Manufacturing Industries in China, 1980–2002 |
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Authors: | Yanhui Fan Wang Song |
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Institution: | (1) School of Economics and Business Administration, Beijing Normal University, Beijing, 100875, PRC;(2) China Center for Economic Research, Peking University, Beijing, 100871, PRC |
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Abstract: | This paper analyzes the effect of changes in real exchange rate on manufacturing employment. Our theoretical model predicts
the positive effect of depreciation of real exchange rate on employment through a firm’s expectation on changes in real exchange
rate and the interaction between real exchange rate and a firm’s import and domestic input. Using China’s manufacturing data
during the 1980–2003 period, we find that depreciation of real exchange rate promotes employment growth in manufacturing industries,
while change in real exchange rate is not a significant factor in promoting wage growth. We also find that an increase in
export share offsets partially the effects of real exchange rate on employment and real wages.
Translated from Journal of World Economy, 2005, (4): (in Chinese) |
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Keywords: | real effective exchange rate employment real wage |
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