Factors Affecting the Cost of Living Index in the Libyan Economy - An Econometric Study

Abstract

This study aimed to know the extent to which the consumer price index in Libya was affected during the period (1980-2017) by some economic variables by using the co-integration model, error correction and the use of the ARDL methodology. The property of the unit root (not static), and that it is not fixed in its levels. As for the results of the co-integration test, the study showed that the variables are on joint integration among themselves, and that they tend to balance in the long range. In the short range, the study found that there is no relationship between the exchange rate and the consumer price index, while there is a direct relationship between public expenditure and the consumer price index, and there is a direct relationship between GDP and the consumer price index, and a direct relationship between Money supply and the consumer price index. While the long-term information indicates a direct relationship between the exchange rate and the consumer price index, and no relationship between public expenditure and the consumer price index, while there is an inverse relationship between GDP and the consumer price index, and also a direct relationship between the money supply and the consumer price index. The study recommended reviewing fiscal and monetary policy to ensure rationalization of public expenditure and reducing the money supply in line with the volume of commodity supply to curb inflation.