The Impact of Oil Revenues on Money Supply: An Empirical Study on the Libyan Economy during the Period (2000-2022)

Abstract

This study aims to identify the impact of oil revenues on the money supply in the Libyan economy during the period (2000-2022). To achieve this, the autoregressive distributed lag (ARDL) model was employed. The main results indicate the existence of co-integration among the study variables, meaning that both oil revenues and the money supply move together over time. The results of the Unrestricted Error Correction Model (UECM) show that the error correction term is negative and statistically significant at all considered significance levels, meeting the fundamental condition for short-term dynamics. This implies that approximately 7.3% of short-term errors can be corrected annually, and returning to equilibrium is possible within about a quarter of a year, which demonstrates the robust potential of using this model to estimate the short-term relationship between the dependent and independent variables.