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Searching for the Finance-Growth Nexus in Libya

Serhan Cevik () and Mohammad Rahmati

No 13/92, IMF Working Papers from International Monetary Fund

Abstract: This paper investigates the causal relationship between financial development and economic growth in Libya during the period 1970–2010. The empirical results vary with estimation methodology and model specification, but indicate the lack of long-run relationship between financial intermediation and nonhydrocarbon output growth. The OLS estimation shows that financial development has a statistically significant negative effect on real nonhydrocarbon GDP per capita growth. However, the VAR-based estimations present statistically insignificant results, albeit still attaching a negative coefficient to financial intermediation. It appears that nonhydrocarbon economic activity depends largely on government spending, which is in turn determined by the country’s hydrocarbon earnings.

Keywords: Financial systems; Financial intermediation; Economic models; Africa; Economic growth; Development; Libyan Arab Jamahiriya; Libya; Nonoil sector; Production growth; Time series; Financial development, cointegration, causality, VAR models, gdp per capita, financial system, gdp growth, Institutions and Growth, Comparative Studies of Countries, (search for similar items in EconPapers)
Date: 2013-05-01
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