Macroeconometric model of an oil based economy : case study of Libya.

Macroecometric models are extremely
important for developing countries
as well as
for developed
countries. They can help and guide planners, policy
makers and government
leaders to establish priorities
in their activities and to
chose those policies which permit the most the rapid advance of economic
development.
The aim of this thesis is to construct a macroeconometric model
for the
Libyan economy and to use the model to forecast future economic activities
under different
scenarios.
The Background
of the Libyan economy
is outlined
first. Brief
reviews of
the theory of the background
to the model components are given
in
the first part
of the thesis. The specification of the model equations, depending
on the
economic theory and estimation procedures are carried out
in the second part of
the thesis. The calculations are carried out with a TSP package. Model
validation
is
carried out
in the third part of the thesis. This includes model
evaluation
(tracking performance and dynamic
properties) and multiplier
analysis. Model implications,
such as
forecasting (Ex-Post and Ex-Ante) are
described in
the last part of the thesis. Two different
scenarios are considered.
These
scenarios explore the effects of different
sets of oil prices and production
on the Libyan
economy,
for
the period 1996-2005. Several policy
implications
are derived from
the results of the scenarios. The conclusion reached
is that the
Libyan
economy
is heavily dependent
on Oil Revenues and any shock
in
this
variable will have
great effects on the Libyan economy. Also, excessive
government spending
is the main reason
for
the high inflation
rate, which also
leads to the crowding out of private
investment.