The Impact of International Reserves on the Parallel Market Exchange Rate in the Libyan Economy: An Econometric Study Using the ARDL Model for the Period (2014–2025)

Abstract

This study aims to analyze the impact of international reserves on the exchange rate
in the parallel market in the Libyan economy during the period (2014–2025), in light of the economic fluctuations experienced by the country. The study is based on quarterly data and employs the Autoregressive Distributed Lag (ARDL) model to examine the short-run and long-run relationships between the variables.

The empirical findings reveal the existence of a long-run equilibrium relationship between international reserves and the exchange rate in the parallel market. The results also indicate
a statistically significant negative relationship between the two variables. This can be explained by the fact that higher levels of international reserves enhance the central bank’s ability
to intervene in the foreign exchange market and support the domestic currency, thereby contributing to a decline in the parallel market exchange rate.

Based on these findings, the study recommends strengthening international reserves and improving their management, as this would support exchange rate stability and reduce its volatility, ultimately contributing to overall economic stability.