Skip to main content
placeholder image

Oil production rehabilitation, fiscal policy and economic development in Libya: a future view

Journal Article


Abstract


  • This paper develops and simulates a dynamic general equilibrium macroeconomic model to

    analyze the likely impact of oil production and revenue rehabilitation on the Libyan economy,

    under different government fiscal policy responses. The model is ideally appropriate to analyze

    macroeconomic issues in oil-producing developing countries. In particular, it is capable of

    incorporating alternative government policy responses toward the allocation of the oil revenue

    either upon consumption spending or development spending in the form of government investment

    spending upon infrastructure, human capital formation and technology acquisition in non-oil

    production. It is also capable of incorporating different degrees of international capital mobility

    and other features that characterize oil-producing developing countries. We distinguish between

    the short-run and long-run impact of the oil production recovery upon the real exchange rate, price

    level, the non-oil trade balance, foreign assets, physical capital stock, human capital stock,

    imported capital stock and non-oil production. Based on recent development of oil production in

    Libya the paper finds that fiscal policy responses exert a crucial impact on the macroeconomic

    adjustment process. In particular, the implementation of a development oriented policy in the form

    of increased government expenditure upon infrastructure, human capital formation, and

    technological acquisition can transform the economy into a well-equipped one able to diversify and

    build a viable non-oil economy, and, therefore, to maintain and improve its competitive

    advantages. This eventually will result in noticeably improved economic outcomes and overall

    development of the economy.

Publication Date


  • 2015

Citation


  • Ali, I. & Harvie, C. (2015). Oil production rehabilitation, fiscal policy and economic development in Libya: a future view. Energy Economics Letters, 2 (1), 2308-2925.

Number Of Pages


  • 617

Start Page


  • 2308

End Page


  • 2925

Volume


  • 2

Issue


  • 1

Place Of Publication


  • United States

Abstract


  • This paper develops and simulates a dynamic general equilibrium macroeconomic model to

    analyze the likely impact of oil production and revenue rehabilitation on the Libyan economy,

    under different government fiscal policy responses. The model is ideally appropriate to analyze

    macroeconomic issues in oil-producing developing countries. In particular, it is capable of

    incorporating alternative government policy responses toward the allocation of the oil revenue

    either upon consumption spending or development spending in the form of government investment

    spending upon infrastructure, human capital formation and technology acquisition in non-oil

    production. It is also capable of incorporating different degrees of international capital mobility

    and other features that characterize oil-producing developing countries. We distinguish between

    the short-run and long-run impact of the oil production recovery upon the real exchange rate, price

    level, the non-oil trade balance, foreign assets, physical capital stock, human capital stock,

    imported capital stock and non-oil production. Based on recent development of oil production in

    Libya the paper finds that fiscal policy responses exert a crucial impact on the macroeconomic

    adjustment process. In particular, the implementation of a development oriented policy in the form

    of increased government expenditure upon infrastructure, human capital formation, and

    technological acquisition can transform the economy into a well-equipped one able to diversify and

    build a viable non-oil economy, and, therefore, to maintain and improve its competitive

    advantages. This eventually will result in noticeably improved economic outcomes and overall

    development of the economy.

Publication Date


  • 2015

Citation


  • Ali, I. & Harvie, C. (2015). Oil production rehabilitation, fiscal policy and economic development in Libya: a future view. Energy Economics Letters, 2 (1), 2308-2925.

Number Of Pages


  • 617

Start Page


  • 2308

End Page


  • 2925

Volume


  • 2

Issue


  • 1

Place Of Publication


  • United States