Analyzing the Dynamic Relationship Between Selected Macroeconomic Variables and Unemployment in Libya (1990–2022)

Abstract

The study aims to analyze the dynamic relationship of some macroeconomic variables and the unemployment rate in Libya during the period (1990-2022) through descriptive analysis and standard analysis using  the ARDL methodology and the error correction model  (ECM) to estimate the relationship between macroeconomic variables and unemployment rates, as the results of the standard analysis indicated a common integration relationship between the unemployment rate and both the growth rate of the economically active population and the GDP growth rate, as long-term data indicate The unemployment rates are at 19.576% in the absence of independent variables, while the short-term results showed a statistically significant positive relationship with the unemployment rate and both the unemployment rate in the previous year and the growth rate of the active population in the previous year and the GDP growth rate, while there is a statistically significant inverse relationship with the consumer price index in the first slowdown period and the unemployment rate, and this proves the validity of the Phelps curve in the Libyan economy, as It was found through the Granger causality test that there is one causal relationship in the short term that tends from unemployment to inflation, and the error correction coefficient CointEq(-1)* indicates that the unemployment rate takes approximately 21.8 months to return to its equilibrium value, and the adjusted coefficient indicates that about 79% of the changes in the unemployment rate in Libya are due to the independent variables listed in the model, in addition to that, the study has recommended restructuring the economy and intensifying efforts towards diversification. Economic and linking education outputs in line with the requirements of the Libyan labor market with the study of the causes of unemployment among young people depending on other variables.