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The Long Run Effects of Oil Prices on Economic Growth: The Case of Libya

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  • Nagmi Moftah Aimer

    (Department of Economics, Higher Institute of Marine Sciences Techniques Sabratha, Libya.)

Abstract

The aim of this paper is to study the impact of price shocks on economic growth in Libya using a sample of annual observations from 1990 to 2016. We apply autoregressive distributed lag (ARDL) models for the analysis of long-run relations between variables. Our estimates suggest that oil price increases have a statistically significant and positive effect on the economic growth of Libya. However, that the positive change 1% in the shock of crude oil prices has a positive impact on Libya?s GDP by 0.29%. In addition, the error correction (ECM) results showed that 68% of the imbalance from the previous year?s shock converges to the long-term equilibrium in the current year. Overall, the results indicate that crude oil prices have had a positive impact on economic growth in the long-term, while trade openness and imports have had a negative impact on economic growth. Finally, to overcome the impact of fluctuations in oil prices, long-term plans should be initiated to diversify the Libyan economy and gradually reduce dependence on the oil.

Suggested Citation

  • Nagmi Moftah Aimer, 2019. "The Long Run Effects of Oil Prices on Economic Growth: The Case of Libya," International Journal of Social and Administrative Sciences, Asian Economic and Social Society, vol. 4(2), pages 232-242, June.
  • Handle: RePEc:asi:ijosaa:2019:p:232-242
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    References listed on IDEAS

    as
    1. Nagmi Moftah Aimer, 2019. "The Impact of Exchange Rate Volatility on Stock Prices: A Case Study of Middle East Countries," Asian Development Policy Review, Asian Economic and Social Society, vol. 7(2), pages 98-110, June.
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    5. Lutz Kilian, 2009. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review, American Economic Association, vol. 99(3), pages 1053-1069, June.
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    More about this item

    Keywords

    Oil prices; Economic growth; GDP; Libyan economy; ARDL; Bounds testing; CUSUM.;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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