Changes in oil prices and their impact on local price levels in the Libyan economy

Abstract

This study aimed to investigate the impact of oil price fluctuations on domestic prices and to explain the nature of this impact, particularly in light of the upward trend in domestic prices in recent years. The study adopted an inductive approach, reviewing and drawing conclusions from previous studies and research. It also employed a quantitative approach, utilizing modern econometric tests and methods, including unit root tests, distributed interval auto regression, and tests to measure the accuracy of the estimated model. The study concluded with several key findings, most notably that domestic prices are inversely affected by short-term changes in oil price behavior, but this effect diminishes in the long term. Conversely, the level of domestic prices is directly affected by long-term changes in the rate of growth of the money supply.

Keywords: Oil prices, domestic price level, Libyan economy, unit root tests.