The Economic and Administrative Dimensions of Exchange Rate Fluctuations and Their Impact on Oil Prices and Oil Revenues in Libya

Abstract

The study aims to identify and analyze the economic and administrative dimensions, as well as evaluate the resulting effects of exchange rate fluctuations and identify the factors influencing the relationship between exchange rate fluctuations and the economic and administrative dimensions. This study relies on a standard framework combining SVAR and ARDL with GARCH volatility modeling, and an event analysis of the exchange rate unification decision on January 3, 2021, and the 2024 disruptions. Monthly data from 2015–2025 were used for Brent prices, Sidr/Dated crude oil spreads, the official and parallel exchange rates, the price index, export volumes and revenues, and domestic fuel prices. The oldest channels of economic and administrative impact are the following. The results indicate that the 2021 exchange rate unification was an important but ineffective measure, as its long-term effectiveness depended on sustained fiscal discipline, diversification of revenue sources, and political stability. Statistical tests showed that oil prices and the exchange rate were stable, with a long-term relationship between the variables, according to integration tests. The ECM coefficient demonstrated the system's ability to return to equilibrium aftershocks, and the SVAR model showed that oil price shocks affect the exchange rate in the short run with high sensitivity. The Ljung–Box test confirmed the model's adequacy, while the ARCH LM revealed a clustering of fluctuations, justifying the use of GARCH models, which in turn demonstrated long-term stability.