An ARDL Co-Integration Approach to Inflation, FDI and Economic Growth in Libya

  • Behiye CAVUSOGLU Near East University, Department of Economics, Nicosia, North Cyprus
  • Mariam ALSABR Near East University, Department of Economics, Nicosia, North Cyprus

Abstract

Despite the different economic systems that are prevalent around the world, inflation and foreign direct investment (FDI) are two important instruments to attain economic objectives. It is apparent that the inflation rate is an important indicator of the economic performance of any country and this has necessitated the urgent need to measure, study and analyze this phenomenon. FDI is another important factor affecting economic growth, which plays an essential role in the economies of host countries, particularly those that are developing economies, including Libya. The Libyan economy has many characteristics and features that make it attractive to the foreign investors. The main aim of the study is to analyze the relationship between inflation, foreign direct investment and economic growth in Libya. In order to investigate the relationship between the variables, the ARDL Bound test was used along with necessary statistical tests. The obtained results showed that there is a continual correlation between inflation, foreign direct investment and economic growth in Libya. Further observations showed that foreign direct investment policies being implemented by the Libyan government have had an adverse effect on economic growth.

References

[1] Andinuur, J. 2013. Inflation, Foreign Direct Investment and Economic Growth in Ghana, Unpublished doctoral dissertation, University of Ghana,
[2] Central Bank of Libya. 2005. Annual Report. https://cbl.gov.ly/en/annual-reports/ (accessed at 28/04/2016),
[3] Central Bank of Libya, Annual Reports. 2005. https://cbl.gov.ly/en/annual-reports/ (accessed at on 28/04/2016),
[4] Dickey, D.A., Fuller, W.A. 1979. Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association 74, 427-431.
[5] Du L, Yanan, H., and Wei, C. 2010. The Relationship between Oil Price Shocks and China’s Macro-economy: An empirical analysis, Energy Policy, 38(8), 4142-4151,
[6] Engle; R.F., Granger, C.W.J. 1987. Co-Integration and Error Correction: Representation, Estimation, and Testing, Econometrica, Vol. 55, No. 2, pp. 251-276.
[7] Federal Reserve Bank of St Louis, Economic Research, Economic Data. https://fred.stlouisfed.org/tags/series?t=libyaon (accessed to 28/04/2016),
[8] Gregory, A.W., and Hansen, B.E. 1996. Residual-based tests for cointegration in models with regime shifts, Journal of Econometrics, 70, 99-126.
[9] Im, Pesaran, and Shin. 2003. Testing for Unit Roots in Heterogeneous Panels, J. of Econometrics, vol 115, 53-74.
[10] Johansen, S. 1988. Statistical Analysis of Cointegration Vectors, Journal of Economic Dynamics and Control, Vol. 12, No. 2–3, pp. 231–254. 18
[11] Johansen, S. 1991. Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models, Econometrica, Vol. 59, No. 6, pp. 1551–1580.
[12] Johansen, S. 1995. Likelihood-Based Inference in Cointegrated Vector Autoregressive Models (New York: Oxford University Press).
[13] Johansen, S., and Juselius, K. 1990. Maximum Likelihood Estimation and Inference on Cointegration – with Applications to the Demand for Money, Oxford Bulletin of Economics and Statistics, Vol. 52, No. 2, pp. 169–210.
[14] Mena Development Report. 2007. Making the Most of Scarcity Accountability for Better Water Management in the Middle East and North Africa the World Bank, Washington D.C
[15] Narayan, P.K., Narayan, S. 2006. Savings behaviour in Fiji: an empirical assessment using the ARDL approach to cointegration, International Journal of Social Economics, Vol. 33 Issue: 7, pp.468-480
[16] Ng, S., and Perron, P. 1995. Unit root test in ARMA models with data-dependent methods for the selection of the truncation lag, Journal of American Statistical Association 90, 268-281.
[17] Pasaran, M., Im K, and Shin, Y. 1995. Testing for Unit Rots in Heterogenous Panels, no: 9526, Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge.
[18] STATISTA, the Statistics Portal. Libya-Statistics & Facts. https://www.statista.com/topics/3885/libya/ (accessed to 28/04/2016,)
[19] Tahari, A. et al. 2007. Financial Sector Reforms and Prospects for Financial Integration in Maghreb Countries. IMF Working Paper, WP/07/125.
[20] UNCTAD. 1998. World Investment Report, Trends and Determinants. United Nations New York and Geneva.
[21] UNCTAD. 1999. World Investment Report, United Nations Conference on Trade and Development. Foreign Direct Investment and the Challenge of Development. United Nations New York and Geneva.
[22] UNCTAD. 2000. World Investment Report, United Nations Conference on Trade and Development. Cross Border Mergers and Acquisitions and Development. United Nations New York and Geneva.
[23] UNCTAD. (2001. World Investment Report, United Nations Conference on Trade and Development. Promoting Linkages. United Nations New York and Geneva.
[24] UNCTAD. 2002. World Investment Report, United Nations Conference on Trade and Development. Transnational Cooperations and Export Competitiveness, United Nations New York and Geneva.
[25] UNCTAD. 2003. World Investment Report, United Nations Conference on Trade and Development. FDI Policies for Development; National and International Perspectives, United Nations New York and Geneva.
[26] UNCTAD. 2004. World Investment Report, United Nations Conference on Trade and Development. The Shifts towards Services, United Nations New York and Geneva.
[27] UNCTAD. (2005. World Investment Report, United Nations Conference on Trade and Development. Transnational Cooperations and Internationalization of Research and Development, United Nations New York and Geneva.
[28] UNCTAD. 2006. World Investment Report, United Nations Conference on Trade and Development. FDI from Developing and Transition Economics: Implications for Development. United Nations New York and Geneva.
[29] Wallace, J. and Wilkinson, B. 2004. Doing Business with Libya, 2nd edition, Kogan Page Ltd, London.
[30] World Bank. https://data.worldbank.org/country/libya (accessed from on 28/04/2016).
Published
2018-09-03
How to Cite
CAVUSOGLU, Behiye; ALSABR, Mariam. An ARDL Co-Integration Approach to Inflation, FDI and Economic Growth in Libya. Journal of Advanced Research in Law and Economics, [S.l.], v. 8, n. 8, p. 2373-2382, sep. 2018. ISSN 2068-696X. Available at: <https://journals.aserspublishing.eu/jarle/article/view/2199>. Date accessed: 29 mar. 2024. doi: https://doi.org/10.14505//jarle.v8.8(30).07.