The Effects of Exchange Rate Policy on Investments in Libya

Abdalla.I.Nor Al-Deen

 
The aim of this study was focusing on estimating the real exchange rate for Libyan Dinar and estimating the real investment function. We have used data for foreign trade in order of estimating real exchange rate, with addition of another economics variables included general level of prices and money supply (MS1). In both functions we have adopted Partial Adjustment Model(PAM) for determine and estimation. For real exchange rate we have used  the period extended from (1970 to 2010) due of data lack, on the other hand for real investment function estimation we hade take the period from (1970 to 2006) where the data was available. The results of estimation have revealed that in the long run the real exchange rate will play good role for escalating foreign investments, that because the model have show high value of long run elasticity. In the meanwhile, all the economic variables have been used in estimations has been found significant and consisted with economic theory.