Factors Determining the Exchange Rate in the Unofficial Market and Their Impact on Domestic Investment in the Libyan Economy: An Econometric Study Using the ARDL Model During the Period (1990-2025)

Abstract

This study aims to analyze and estimate the impact of the determinants of the exchange rate in the parallel (informal) market on the level of domestic investment in the Libyan economy during the period (1990–2025). The study employs an econometric approach using the Autoregressive Distributed Lag (ARDL) model to examine both the short-run and long-run relationships among the study variables. The findings reveal the existence of a long-run cointegration relationship between the parallel exchange rate and domestic investment. The results also indicate that the parallel exchange rate has a statistically significant negative effect on private investment in both the short and long run Furthermore, the estimated error correction coefficient is approximately 49%, indicating a relatively rapid adjustment of investment toward its long-run equilibrium path. The study recommends unifying the exchange rate, strengthening coordination between fiscal and monetary policies, and diversifying the productive base of the Libyan economy.