Many people recognize the manipulation of the money can not increase employment, expansion of production. But the one to the exchange rate, attitude come at once made a 180 degree turn.

You underestimate the nominal exchange rate, domestic prices and wages will rise, and the corresponding foreign prices and wages will drop, and the results, the real exchange rate has not changed. Said, we can change the name of the variable, it is hard to change the actual variable.

Always tends to show the actual variable to its origins, the real exchange rate always tends to show to its origins. The so-called currency manipulation, a one-off. Long-term, no one can really manipulate the exchange rate. The Chinese government can not, the U.S. government can not.

Exchange rate depreciation, initially, the dollar price of exports will not change. The dollar price of exports in international market, the competition model of supply and demand by the co-decision; supply, demand unchanged, the dollar price of exports will not change. This case, the profits of exporters will increase. But things will not be this shelling ceased. Assuming no change in domestic wages and prices, then the original export firms will expand production, new firms will enter the results on the international market will increase the supply of export commodities, the dollar prices of export commodities will decline. Of course, things still will not this shelling ceased.

Domestic wages and prices is not impossible to change, more or less, is to go up. In the end, so exports will decline in the dollar price of exports rebounded. In particular, when the country was already full employment, then this effect would more strongly. If an economy has full employment was the case, then wants to increase exports through exchange rate depreciation possibility would be small. If the economy fails to achieve full employment, then the results will happen? Since the economy failed to achieve full employment, then wages and prices had a downward trend, even if not to devalue the exchange rate, exports will increase. On the surface, the exchange rate devaluation to promote exports and employment, but in fact fundamentally inadequate for the job has the cost advantage.

Exchange rate appreciation, the beginning, the dollar price of exports will not change. This case, the profits of exporters would be reduced. However, this matter will not be shelling ceased.

Assuming no change in domestic wages and prices, then exporters will reduce production, some companies will even opt out of the export market. As a result, international markets will reduce the supply of export commodities, the dollar prices of export commodities will rise. Similarly, there is still not this shelling ceased. Domestic wages and prices is not impossible to change, more or less, is to decline. In the end, so exports will increase in the dollar price of exports has declined. In particular, when the country did not achieve full employment, then this effect would more strongly.

That is, if the economy did not achieve a full employment, then want to pass the exchange rate appreciation to reduce the possibility of exports is not large. If the economy has full employment, then the results will happen? Since the economy has full employment, wages and prices is not easy to drop, even if the exchange rate does not appreciate, is not easy to increase exports. On the surface, is the exchange rate reduces exports and employment, in fact, but fundamentally because of the low-cost advantage of full employment led to loss.

How can the world will be solved by manipulating the exchange rate of employment of a good thing. If so, does it mean that we are to manipulate the exchange rate better.

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