The Impact of Foreign Investment on Economic Development in Libya: An Analytical and Econometric Study during the Period (1990–2021)

Abstract

Foreign direct investment (FDI), as confirmed by economic theory and numerous empirical studies, is one of the most influential factors in economic growth and development, given its positive effects on host countries and its role as an important source of development financing. This study aims to examine the size and impact of FDI on economic growth and development in Libya during the period (1990–2021). To achieve this, the study adopted a descriptive-analytical and econometric approach by analyzing the development of economic growth and inward FDI stock in Libya based on data from UNCTAD reports and the World Bank database. The study further employed the Augmented Vector Autoregression (VAR) model to test the Toda & Yamamoto causality in the long run. The findings revealed the existence of a long-term causal relationship running from FDI to economic growth in Libya, as measured by Gross Domestic Product (GDP). Keywords: Foreign Direct Investment, Economic Growth, Libya.