Searching for the Finance-Growth Nexus in Libya

22 Pages Posted: 8 Jun 2013

See all articles by Serhan Cevik

Serhan Cevik

International Monetary Fund (IMF)

Mohammad Hossein Rahmati

Sharif University of Technology

Date Written: May 2013


This paper investigates the causal relationship between financial development and economic growth in Libya during the period 1970–2010. The empirical results vary with estimation methodology and model specification, but indicate the lack of long-run relationship between financial intermediation and nonhydrocarbon output growth. The OLS estimation shows that financial development has a statistically significant negative effect on real nonhydrocarbon GDP per capita growth. However, the VAR-based estimations present statistically insignificant results, albeit still attaching a negative coefficient to financial intermediation. It appears that nonhydrocarbon economic activity depends largely on government spending, which is in turn determined by the country’s hydrocarbon earnings.

Keywords: Development, Libya, Economic growth, Nonoil sector, Financial intermediation, Production growth, Financial systems, Economic models, Time series, Financial development, cointegration, causality, VAR models, gdp per capita, financial system, gdp growth, growth rate, financial services, growth model, stock markets, financial resources, stock market, financial markets, financial sector, per capita income, financial globalization, money market, financial instruments, financial institutions, stock market liquidity, real gdp, financial economics, international financial statistics, financial stability

JEL Classification: E31, O16, O43, O54, O55, O57

Suggested Citation

Cevik, Serhan and Rahmati, Mohammad Hossein, Searching for the Finance-Growth Nexus in Libya (May 2013). Available at SSRN: or

Serhan Cevik (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Mohammad Hossein Rahmati

Sharif University of Technology ( email )

Graduate School of Business and Economics
Sharif University of Technology
+98-21-6604-9195 (Phone)


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