The Impact of Political Instability and Oil Revenue Volatility on GDP: An Econometric Study of the Libyan Economy (1996-2024)

Abstract

This study aimed to demonstrate the impact of political fluctuations on the performance of the Libyan economy during the period under review, during which Libya experienced international sanctions, followed by a phase of relative political stability, then a political transition, and finally a stage of division. The oil sector constitutes the largest contributor to Libya's Gross Domestic Product (GDP). Hence, the research problem arises: To what extent have political fluctuations and the reliance on the oil sector as the state's sole source of income affected GDP performance over the quarter-century (1996–2024)? To address this, the study employed econometric analysis and time series analysis. It reached the following conclusion: conditions of political instability and sudden shocks to the oil sector have a very significant negative impact on the performance of GDP in Libya, in both the short run and the long run stability.