Estimating the Libyan Import Function from Syria (Using Cointegration Analysis and the Error Correction Model)

Abstract

This study aims to demonstrate the impact of some macroeconomic variables on                                      

   Libyan imports from Syria during the period (1975-2010). The focus of this study is on the role of the level of real national income, the exchange rate, and relative prices on Libyan-Syrian imports through an econometric error correction model (ECM) estimation. The necessary data were obtained from statistics and annual data issued by the International Monetary Fund, the Arab Monetary Fund, and the Central Bank's bulletins. The study used the unit root test to determine the degree of integration of the variables, and the Johansen cointegration method to test the existence of an equilibrium relationship between the variables. The results of the statistical tests using the econometric model showed that the data used in the model were stationary and stable at the first difference and were first-degree integrated at the 5% level, which illustrates the long-run equilibrium relationship between imports and the variables included in the model. The econometric model estimation also shows that the relationship between imports and relative prices was negative, meaning that the higher the relative prices, the lower the imports. This also applies to exchange rates. As for real GDP, the relationship was positive, meaning that the higher the real GDP, the more imports significantly increased. Finally, based on the previous results, the study proves the validity of its hypothesis, namely that there is a real, albeit relatively slow, development in economic relations between Libya and Syria, and that this development reflects the private interests of the two countries. Furthermore,

this development contributes to achieving economic development for both countries

(Imports – Trade – Investment – ​​Integration )