Cointegration between import components and economic growth: Evidence from the Gregory-Hansen methodology

Abstract

This study aimed to analyze the components of Libyan imports-consumption, intermediate, and capital goods- and estimate their impact on economic growth during the period 1970-2024. It primarily relied on Hansen’s model to detect long-term equilibrium relationships under structural breaks, alongside the use of FMOLS, DOLS, and COR models to examine the relationships between import components and economic growth. The impact of these components varied: consumer imports showed no supportive effect on growth, intermediate imports had limited impact, while capital imports exhibited a stronger positive effect. Additionally, a dummy variable for the post-2011 period indicate a significant structural shift in import behavior. The study emphasizes the importance of reorienting the import structure toward components that support the production process and sustainable growth.