The impact of oil price shocks on economic growth in Libya (1990-2016): An ARDL bound testing approach

This study aims to analyze the impact of price shocks on economic growth in Libya using a sample of annual observations from 1990 to 2016. We apply the Autoregressive distributed lag ARDL-Bounds testing approach. Using the two tests (ADF) and (PP). To that end, the results of all tests show that the time series of the previous variables proved to be series is unstable at the level I(0) but stable at the first difference at all levels, which means it is an integrated I(1). Moreover, the results of Cringer's causality tests show a causal two-way relationship between oil prices (imports, GDP and trade openness) during the study period. The results of the causality tests also showed that the one-way impact of the price of oil to the trade balance, for example that the positive change a 1% in the shock of crude oil prices has a positive impact on Libya's GDP by a 0,29%. Finally, 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. Given the importance of crude oil for the Libyan economy. 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.