The Impact of Monetary Policy Tools on the Exchange Rate in Libya: An Empirical Study Using the ARDL Model (2019–2024)

Abstract

This study investigates the effect of monetary policy instruments on the stability of the Libyan exchange rate during the period 2019–2024. Using quarterly data, the research employs the (ARDL) model and the (ECM) to examine both short-term and long-term relationships between the official exchange rate (EXR), Monetary Policy Tools. These results suggest that money supply and inflation are key drivers of exchange rate volatility, while foreign reserves play a major stabilizing role. Recommendations include regulating money supply growth, activating interest rate policies, strengthening foreign reserves, and improving coordination between monetary and fiscal policies.