Searching for the Finance-Growth Nexus in Libya

Serhan Cevik and Mohammad Rahmati

No 2013/092, 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: WP; hydrocarbon GDP; GDP growth; finance-growth nexus; rate of change; well-functioning financial system; Financial development; economic growth; cointegration; causality; VAR models; Financial sector development; Credit; Commercial banks; Oil prices (search for similar items in EconPapers)
Pages: 21
Date: 2013-05-01
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Citations: View citations in EconPapers (3)

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Journal Article: Searching for the finance–growth nexus in Libya (2020)
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