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

Nagmi Moftah Aimer
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Nagmi Moftah Aimer: Department of Economics, Higher Institute of Marine Sciences Techniques Sabratha, Libya.

International Journal of Social and Administrative Sciences, 2019, vol. 4, issue 2, 232-242

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.

Keywords: Oil prices; Economic growth; GDP; Libyan economy; ARDL; Bounds testing; CUSUM. (search for similar items in EconPapers)
JEL-codes: E44 F21 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:asi:ijosaa:2019:p:232-242