An Econometric Analysis of the Determinants of the Parallel Market Exchange Rate in the Libyan Economy During the Period 1990-2025: An ARDL Approach

Abstract

This study aims to identify the factors influencing the parallel market exchange rate in the Libyan economy during the period (1990 – 2024). The autoregressive estimation using conducted using the Autoregressive Distributed Lag: (ARDL) model, utilizing annual time series data. The primary findings of this study reveal the existence of cointegration among the variables, implying that the explanatory determinants: Gross National Product (GDP), Government expenditure (SG) and Money Supply (M1) move together over time with the dependent variable, represented by the parallel exchange rate. Furthermore, the Error Correction Model (ECM) test results indicate that the error correction term is both negative and statistically significant across all considered significant levels, thereby satisfying the fundamental condition of the model. This implies that 45% of the short run equilibrium erroes are corrected within the same period.