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

Yanhui Fan () and Wang Song ()
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Yanhui Fan: School of Economics and Business Administration, Beijing Normal University, Beijing 100875, PRC
Wang Song: China Center for Economic Research, Peking University, Beijing 100871, PRC

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2006, vol. 1, issue 1, 126-139

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.

Keywords: real effective exchange rate; employment; real wage (search for similar items in EconPapers)
JEL-codes: F16 F31 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (2)

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