Domestic Investment as a Drive of Economic Growth in Libya

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Presentation transcript:

Domestic Investment as a Drive of Economic Growth in Libya By: Naser Tawiri

Presentation Plan Aim Methodology & method Model Dummy variable Conclusion

Research Aim: To identify the impact of domestic investment as a determinant of growth in the Libyan economy from 1962 to 2008.

Methodology and Method Cobb-Douglas function to analyse the relationship between real per-capita GDP and domestic investment. Econometrics methodology to analyse properties of time series.

Analysis Devices Engle-Granger Unit Root Granger Causality Stationarity Unit Root Co-integration Engle-Granger Causality Granger Causality

The Model ln PCGDP𝑡 = α + β ln INVEST 𝑡 + e

Stationarity & Cointegration PCGDP & INVEST are stationary at 1st level (I(1)). Residuals are stationary at level zero (I(0)).

Constant 2.03 12.2* INVEST 0.76 15.7* Long-run Estimation Variables Coefficients T. test Constant 2.03 12.2* INVEST 0.76 15.7*

Short-run Estimation Constant 0.039 0.90 INVEST 0.54 7.06* Residuals Variables Coefficients T. test Constant 0.039 0.90 INVEST 0.54 7.06* Residuals -0.38 -3.7*

Validity of the Model D.h.W: Model free from serial correlation problem. Jarque-Bera: Residuals are normally distributed. LM: Free from serial correlation until 3rd degree. ARCH: No variance until 3rd degree. Ramsey RESET: No restriction error in the model.

Granger Causality Test Results Version Hypothesis N L F stat. Result 1 H₀: PCGDP does not cause INVEST 2.51 PCGDP≠→ lNVEST 2 H₀: INVEST does not cause PCGDP 5.30* INVEST = → PCGDP

Dummy Variable Dummy variable took values (1, 0), (1) indicates absence of private sector from 1979 to 2000, (0) refers to existence of private sector from 1962 to 1978 and from 2001 to 2008. Dummy coefficient = -0.25 with significant level T = (-3.08).

Conclusions Changes in investment help to explain changes in economic growth. Domestic investment plays important role in stimulating economic growth rates in Libya. Limitation of private sector activity has negative impact on economic growth.

Thank you very much