The impact of Government Spending on imports: An Econometric Study on the Libyan Economy for the Period 2000-2023

Abstract

This study aims to estimate the impact of public spending on imports in the Libyan economy over the period from 2000 to 2023. By employing the Autoregressive Distributed Lag (ARDL) model and the Unrestricted Error Correction Model (UECM), the findings reveal the presence of cointegration between the two study variables, reflecting a long-run equilibrium relationship between public spending and imports. Moreover, the error correction term is negative and statistically significant at various significant levels, which confirms the short-run stability condition. The error correction coefficient indicates that approximately 17.36% of short-run disequilibria are corrected within one year, suggesting a relatively swift adjustment back to equilibrium. Furthermore, the statistical significance of the independent variable demonstrates the model's reliability in explaining the short-run relationship between the variables.