Abstract: Based on the panel data of 34 industrial sectors in China, this paper studies the relationship between unit labor costs, exchange rate fluctuation and the exports of our country by using the panel vector auto regression model (PVAR). Results show that there is bidirectional inhibition between unit labor costs and exports, rising wages is not conducive to the expansion of export scale and the promotion of wage growth rate, but exports significantly enhance the labor productivity. The impulse response function value indicating the influence of exchange rate risk on export presents positive and negative alternation, which is characterized by uncertainty. Exports emerge overshoot phenomenon as a result of exchange rate changes. In addition, there exists "import induces export mechanism" in our country and export also has influence on import through two paths including the income effect and the exchange rate. The impacts of output on exports display uncertainty, but exports can drive production growth. In the variance decomposition, the unit labor cost variable possesses strong capability of explaining exports, is the main factor leading to changes in China's exports. Exchange rate risk is powerful to explain exports in the short term, import possesses long-term explanation ability, the explanation capability of output are basically the same in three different periods, but exports has a generally lower explanation ability compared to other variables.

Key words: unit labor cost, exchange rate fluctuation, export, panel vector auto regression