Determinants of Private Investment in the Libyan Economy: An Econometric Study for the Period (1980–2020)

Abstract

This study aims to highlight the importance of private investment and the extent to which it is influenced by its determinants ' influence, given its significant role in promoting economic development. The study focuses on the Libyan economy over the period 1980–2020. It employs both the descriptive analytical approach and econometric time-series techniques. An econometric model was estimated to examine the relationships among the studied variables.
The findings indicate the existence of a long-run equilibrium (cointegrating) relationship among the studied variables, suggesting that they move together over the long term and that any short-run deviations from equilibrium are temporary and gradually converge back to the long-run equilibrium path.

   In the short run, the results reveal that public investment and gross domestic product (GDP) exert a positive and statistically significant effect on private investment, whereas government consumption expenditure has a negative effect. The estimated error correction coefficient indicates that approximately 86% of short-run disequilibrium is corrected within one year, reflecting a rapid adjustment toward the long-run equilibrium. Furthermore, the Granger causality test confirms the existence of causal relationships among some of the studied variables, particularly a unidirectional causal relationship running from public investment to private investment, as well as a bidirectional causal relationship between private investment and gross domestic product.