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Cointegration between Electricity prices and the Consumer Price Index in Lao PDR

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  • Soukvisan Khinsamone

Abstract

This study investigates the relationship among electricity prices, exchange rates, and the Consumer Price Index (CPI) in Lao PDR using the nonlinear autoregressive distributed lag model. It employs time-series data from 1990 to 2023 and applies unit root tests, cointegration analysis, and bound testing to examine both long- and short-run relationships. The empirical results indicate that electricity price increases significantly contribute to inflation, while exchange rate depreciation has a stronger inflationary effect than appreciation. The short-run dynamics further confirm these asymmetric effects, with the CPI responding more strongly to depreciation than to appreciation. Additionally, the error correction term is negative and statistically significant, confirming that deviations from equilibrium gradually adjust over time. These findings highlight the importance of exchange rate stability and electricity price management in controlling inflation in Lao PDR.

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  • Soukvisan Khinsamone, 2025. "Cointegration between Electricity prices and the Consumer Price Index in Lao PDR," Bulletin of Applied Economics, Risk Market Journals, vol. 12(2), pages 1-13.
    • Handle: RePEc:rmk:rmkbae:v:12:y:2025:i:2:p:1-13
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    More about this item

    Keywords

    Electricity Prices; Consumer Price Index; NARDL Model; Lao PDR.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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