The Impact of Broad Money Supply on Gross Domestic Product in Libya: An Econometric Study (2000–2025)

Abstract

This study aims to analyze the impact of broad money supply—as one of the monetary policy tools—on the gross domestic product in the Libyan economy during the period (2000–2025), using annual data for the two study variables. To achieve this objective, the study employs descriptive and quantitative approaches and applies several econometric techniques. These include the Augmented Dickey–Fuller (ADF) unit root test to examine the stationarity of the time series, the Johansen cointegration test to investigate the existence of a long-run equilibrium relationship, and an error correction model (ECM) to analyze short-run dynamics and the speed of adjustment towards long-run equilibrium. The reported results indicate the existence of cointegration between broad money supply and gross domestic product. The error correction term is negative and statistically significant. The estimates also indicate a positive relationship between broad money supply and GDP in both the short and long run. The study concludes that money supply is associated with economic activity in Libya, while recognizing the importance of other structural factors, particularly the oil sector.