A Time Series Study Of Libya's Import And Growth Implications From Trade Liberalisation

• Main Author: Ahmed Otman Ben Amer
• Format: Thesis
• Language: English
• Published: Universiti Sains Islam Malaysia 2015
• Subjects: FEM
• Online Access: http://ddms.usim.edu.my/handle/123456789/8273

This thesis aims to investigate and analyze the impact of trade liberalization policy on Libya’s import demand. The study applies the autoregressive distributed lag ARDL bound test approach of cointegration developed by Pesaran et.al (2001) to analyze annual time series data of Libya’s imports during the period from 1973 to 2009. The empirical results reveal the existence of a long run cointegration relationship between imports and its elaborates. The results also show that imports are influenced by an increase in income more than by a decline in relative prices. Moreover, non-tariff trade liberalization has a greater impact than tariff trade liberalization on Libyan aggregate imports. The empirical results also show that non-tariff trade liberalization has an indirect positive effect on Libya’s gross domestic product (GDP), which implies that the impact of GDP on aggregate imports is accelerated further by import trade liberalization. In addition, the analysis of import demand categories found that a trade liberalization policy that removes non-tariff barriers has a positive inelastic impact on all import demand categories with a greater impact on the imports of capital goods and raw materials than on the imports of consumption goods. However, import duty that measures tariff liberalization has no impact on all the major categories of imports investigated in this study. The empirical results also show that the relative price and income elasticities of imports are small. The lower import response to a change in prices may reflect the fact that the bulk of Libya’s imports are essential goods. Also, the weak response of imports to changes in GDP would suggest that there was a scope for import substitution in the Libyan economy during the study period.