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Oil-related shocks and macroeconomic adjustment under different nominal exchange rate policies: the case of The Libyan economy

Journal Article


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Abstract


  • Libya is a country heavily dependent on its oil sector since the 1960s and recently

    has experienced a considerable increase in oil revenue as a result of

    increased oil prices particularly after 2000 and oil production rehabilitation since

    2011. Like many natural resource-rich developing countries, however, the country

    has suffered from widespread corruption, including that related to old oil production

    contracts and a cumbersome bureaucracy, which has resulted in misuse of

    oil revenues and poor economic performance. By 2011, the country experienced

    a civil war and political turmoil for a period of eight months.1 The civil war, in

    conjunction with international sanctions imposed by the United Nations, adversely

    affected the domestic economy, in particular the oil sector, and upward pressure on oil prices occurred and oil-related infrastructure was devastated. According to

    the International Monetary Fund’s 2012 Annual Report, the gross domestic product

    (GDP) considerably contracted and crude oil output was almost halted in July

    2011.2 Moreover, nonoil economic activity was mainly influenced by the destruction

    of infrastructure and production facilities, the departure of foreign workers,

    interruptions to the functioning of the banking system, and limited access to

    foreign exchange.3 Since the end of the Libyan revolution in late 2011, Libyan oil

    production has been rehabilitating, registering about 1.2 million barrels per day

    (b/d) by February 2012. As the restoration of oil output continues, with the aim

    of reaching the pre-revolutionary level of 1.7 million b/d, significant revenue

    will be generated to the domestic economy4 and downward pressure might be

    placed on global oil prices. If used effectively, such windfall revenue will play

    a critical role in the future prosperity of Libya and challenge the idea of a “resource

    curse”;5 alternatively, it could cause adverse effects arising from so-called “Dutch

    disease”6 consequences. Therefore, evaluating the impact of windfall revenue arising

    from oil production recovery is of considerable contemporary importance not

    only to the Libyan economy but also European nations that are the predominant

    source of demand for Libyan oil as well as other key regional trading partners.

Publication Date


  • 2015

Citation


  • Ali, I. & Harvie, C. (2015). Oil-related shocks and macroeconomic adjustment under different nominal exchange rate policies: the case of The Libyan economy. Journal of Energy and Development, 40 (1 and 2), 23-50.

Ro Full-text Url


  • http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1822&context=buspapers

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/818

Number Of Pages


  • 27

Start Page


  • 23

End Page


  • 50

Volume


  • 40

Issue


  • 1 and 2

Abstract


  • Libya is a country heavily dependent on its oil sector since the 1960s and recently

    has experienced a considerable increase in oil revenue as a result of

    increased oil prices particularly after 2000 and oil production rehabilitation since

    2011. Like many natural resource-rich developing countries, however, the country

    has suffered from widespread corruption, including that related to old oil production

    contracts and a cumbersome bureaucracy, which has resulted in misuse of

    oil revenues and poor economic performance. By 2011, the country experienced

    a civil war and political turmoil for a period of eight months.1 The civil war, in

    conjunction with international sanctions imposed by the United Nations, adversely

    affected the domestic economy, in particular the oil sector, and upward pressure on oil prices occurred and oil-related infrastructure was devastated. According to

    the International Monetary Fund’s 2012 Annual Report, the gross domestic product

    (GDP) considerably contracted and crude oil output was almost halted in July

    2011.2 Moreover, nonoil economic activity was mainly influenced by the destruction

    of infrastructure and production facilities, the departure of foreign workers,

    interruptions to the functioning of the banking system, and limited access to

    foreign exchange.3 Since the end of the Libyan revolution in late 2011, Libyan oil

    production has been rehabilitating, registering about 1.2 million barrels per day

    (b/d) by February 2012. As the restoration of oil output continues, with the aim

    of reaching the pre-revolutionary level of 1.7 million b/d, significant revenue

    will be generated to the domestic economy4 and downward pressure might be

    placed on global oil prices. If used effectively, such windfall revenue will play

    a critical role in the future prosperity of Libya and challenge the idea of a “resource

    curse”;5 alternatively, it could cause adverse effects arising from so-called “Dutch

    disease”6 consequences. Therefore, evaluating the impact of windfall revenue arising

    from oil production recovery is of considerable contemporary importance not

    only to the Libyan economy but also European nations that are the predominant

    source of demand for Libyan oil as well as other key regional trading partners.

Publication Date


  • 2015

Citation


  • Ali, I. & Harvie, C. (2015). Oil-related shocks and macroeconomic adjustment under different nominal exchange rate policies: the case of The Libyan economy. Journal of Energy and Development, 40 (1 and 2), 23-50.

Ro Full-text Url


  • http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1822&context=buspapers

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/818

Number Of Pages


  • 27

Start Page


  • 23

End Page


  • 50

Volume


  • 40

Issue


  • 1 and 2