The Impact of Economic Uncertainty on Investment in Libya: An Econometric Analytical Study (1995–2024)
DOI:
https://doi.org/10.54172/17bsh128Keywords:
Economic Uncertainty, Domestic Investment, Oil Prices, Exchange Rate, Inflation, NARDL ModelAbstract
This study aims to investigate the impact of economic uncertainty on investment in Libya during the period (1995–2024) using the Non-linear Autoregressive Distributed Lag (NARDL) model. The study utilizes exchange rate volatility, oil price volatility, and inflation rate volatility as proxies for economic uncertainty, while Gross Capital Formation as a percentage of GDP is employed as the dependent variable representing investment.
The empirical results reveal a non-linear relationship between economic uncertainty and investment. Furthermore, the findings indicate that investment sensitivity was significantly higher in the short run compared to the long run. Specifically, negative shocks in exchange rate volatility had a significant negative impact on investment, whereas positive shocks exerted an insignificant positive effect. Similarly, negative oil price shocks significantly hindered investment, while positive shocks had an insignificant positive influence. Conversely, negative inflation rate shocks demonstrated a significant positive impact on investment, while positive shocks resulted in an insignificant negative effect.
The study recommends the adoption of robust monetary and fiscal policies aimed at mitigating economic fluctuations to ensure the creation of an attractive and stable environment for investment.
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