Searching for the Finance-Growth Nexus in Libya

Author/Editor: Serhan Cevik ; Mohammad Rahmati
Publication Date: May 01, 2013
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: 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.
Series: Working Paper No. 13/92
Subject(s): Development | Libya | Economic growth | Nonoil sector | Financial intermediation | Production growth | Financial systems | Economic models | Time series

Publication Date: May 01, 2013
ISBN/ISSN: 9781484385883/1018-5941 Format: Paper
Stock No: WPIEA2013092 Pages: 21
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