Do Changes in Real Exchange Rates Affect Labor Force Participation—Empirical Research Based on Cross-national Panel Data

Abstract

Abstract: Based on the cross-border panel data from 1997 to 2017, this paper constructs a two-way fixed effect model to study the effect of real exchange rate on labor participation rate. The results show that:(1) the appreciation of real exchange rate will reduce the labor participation rate, and depreciation will increase the labor participation rate; (2) the change of real exchange rate mainly affects the labor demand, and then affects the labor participation rate; (3) compared with high-income countries, the real exchange rate change in low-income countries has a more significant impact on labor participation rate. Therefore, the formulation of exchange rate policy needs to consider its impact on labor participation rate. In the process of China's economic development, appropriate measures should be taken to offset the adverse effects of RMB appreciation on labor participation rate.

Key words: real exchange rate, labor participation rate, labor demand

CLC Number:

MA Dan, WANG Peng. Do Changes in Real Exchange Rates Affect Labor Force Participation—Empirical Research Based on Cross-national Panel Data[J]. Journal of Guizhou University of Finance and Economics, 2021(01): 10-21.

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