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The Effect of Changes in Real Exchange Rates on Employment: Evidence from Manufacturing Industries in China, 1980¨C2002

Author

Listed:
  • FAN Yanhui

    (School of Economics and Business Administration, Beijing Normal University, Beijing 100875, PRC)

  • SONG Wang

    (China Center for Economic Research, Peking University, Beijing 100871, PRC)

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.

Suggested Citation

  • FAN Yanhui & SONG Wang, 2006. "The Effect of Changes in Real Exchange Rates on Employment: Evidence from Manufacturing Industries in China, 1980¨C2002," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 1(1), pages 126-139, March.
    • Handle: RePEc:fec:journl:v:1:y:2006:i:1:p:126-139
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-005-0013-y
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    Citations

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    Cited by:

    1. José Tomás Peláez S. & Lya Paola Sierra S., 2016. "Does Industrial Employment React to Movements in the Real Exchange Rate? An Empirical Analysis for Colombia, 2000-2010," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 53(1), pages 39-60, December.
    2. Ojonugwa Usman & Osama Mohammed Elsalih, 2018. "Testing the Effects of Real Exchange Rate Pass-Through to Unemployment in Brazil," Economies, MDPI, vol. 6(3), pages 1-13, September.

    More about this item

    Keywords

    real effective exchange rate; employment; real wage;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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