Searching for the Finance-Growth Nexus in Libya

May 1, 2013

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Serhan Cevik, and Mohammad Rahmati. Searching for the Finance-Growth Nexus in Libya, (USA: International Monetary Fund, 2013) accessed September 19, 2024

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.

Subject: Commercial banks, Credit, Expenditure, Financial institutions, Financial markets, Financial sector development, Money, Oil prices, Prices

Keywords: Causality, Cointegration, Commercial banks, Credit, Economic growth, Finance-growth nexus, Financial development, Financial sector development, GDP growth, Hydrocarbon GDP, Oil prices, Rate of change, VAR models, Well-functioning financial system, WP

Publication Details

Pages:

21
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/092
Stock No:

WPIEA2013092
ISBN:

9781484385883
ISSN:

1018-5941

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