The Effects of Foreign Direct Investment on Economic Growth in Libya: A Causality Analysis

Abdulhakim Abushhewa, Tarek Zarook


This paper aims to analyse the causal relationship between Foreign Direct Investment (FDI) inflows and economic growth in Libya by using empirical analysis to examine FDI Led-Export (FLE) and Export Led-Growth (ELG) hypotheses, over the period, 1992-2010. Most of FDI inflows are concentrated in the oil sector of the Libyan economy, which led to make Libya as one of the Petroleum Exporting Countries around the world. However, the role of FDI, oil exports and GDP growth relationship in Libya is still unclear. Therefore, the major focus of this paper is to explore this relationship through employing Vector Autoregressive (VAR) Model on the relevant variables which are FDI inflows, Oil exports and GDP growth. Our results confirm that there is a long-term relationship between FDI and increasing oil exports, and economic growth in Libya.


FDI; Oil Export; GDP Growth; Causality Analysis; Libya.

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