The Effect Of Lao Kip Depreciation On Net Migration In Lao PDR

Abstract

This study examines the effect of the depreciation of the Lao kip on net migration in Lao PDR using an Autoregressive Distributed Lag (ARDL) model and 30 years of time series data from 1993 to 2023. The COVID-19 pandemic led to business closures, job losses, disruptions to tourism, and a decline in remittances in Lao PDR, resulting in a shortage of foreign currency and depreciati[1]on of the Kip against major currencies. As the Kip lost value, local wages became relatively cheaper compared to imported goods, potentially incentivizing emigration while discouraging immigration. The ARDL analysis reveals that the Kip depreciation has a significant negative impact on net migration in both the short and long run, suggesting increased emigration as earnings in Lao PDR decline relative to other countries. Inflation shows a minimal negative but insignificant effect, while higher GDP per capita is associated with increased net migration by retaining workers and attracting immigrants. The findings highlight the implications of currency fluctuations on labor mobility and the importance of maintaining economic stability to manage migration flows effectively.