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Birth Rates, Government Health Expenditure and the Real Exchange Rate

【Authors】
LU Qianjin
【WorkUnit】
Fudan University
【Abstract】

This paper explores the first-order conditions with respect to consumption and healthy human capital, and the real exchange rate equilibrium equation is obtained under the representative agent utility optimization. In order to further expand the model, the paper analyzes the effects on the real exchange rate of the birth rates, health expenditures, combining with the optimization of producers. Theoretical analysis concludes that there exists a long-run equilibrium relationship amongthe real exchange rate, the population birth rates, government health expenditure and the ratio of non-trade and trade labour productivity; the birth rate and the health expenditures affect the real exchange rate positively or negatively. Dynamic ordinary least squares results of panel datashow that the real exchange rate also moves positively with the government health expenditure, that is, a positive correlation between the two in all cases, while the population birth rate changes with the real exchange rate positively or negatively, depending on certain conditions. The model results are also robust. As China's population policy changes and government health expenditure increases in human capital, this study has an important theoretical and practical significance in analyzingthe changes of RMB real exchange rate.
 
JEL:F31,F41

【KeyWords】
Birth Rate,Government Health Expenditure,Real Exchange Rate,Dynamic Ordinary Least Square(DOLS)