Measuring the Impact of Macroeconomic Factors on Non-Oil GDP in Libya Using a Decelerating Distributed Time-Lag Autoregressive Model (2000–2025)

Abstract

This study aimed to investigate the macroeconomic factors affecting non-oil Gross Domestic Product (GDP) in Libya during the period 2000–2025. The study was motivated by the Libyan economy’s heavy dependence on oil revenues and the need to enhance the contribution of non-oil sectors to sustainable economic growth, the study adopted both descriptive-analytical and econometric approaches using annual time-series data. The Autoregressive Distributed Lag (ARDL) model was employed to estimate both short-run and long-run relationships between non-oil GDP and a set of macroeconomic variables, including government expenditure, domestic investment, foreign direct investment, inflation, exchange rate, money supply, trade openness, and labor force, the empirical findings indicated the existence of a long-run equilibrium relationship among the study variables. Government expenditure, domestic investment, foreign direct investment, money supply, trade openness, and labor force positively affected non-oil GDP, whereas inflation and exchange rate exhibited negative effects. The error correction model confirmed the stability of the estimated model and the economy’s ability to return to long-run equilibrium after short-run shocks, the study recommends strengthening economic diversification policies, encouraging private investment, improving the investment climate, maintaining macroeconomic stability, and promoting non-oil productive sectors to achieve sustainable economic growth in Libya.