Symmetrical and asymmetrical analysis of the effect of the exchange rate on international trade and its financial consequences: analysis of the situation in Libya

Abstract

Exchange rate plans are the primary focus of all adjustment attempts, as they are designed to enhance a nation's competitiveness in the global market. The hypothesis posits that a devaluation of the currency will have ramifications for the economy, particularly concerning foreign accounts. The hypothesis further posits that a lower exchange rate may stimulate exports and enhance the trade balance. Acknowledging that the anticipated positive outcomes may persist over an extended duration is imperative. This article will methodically examine the interplay between the exchange rate, trade balance, imports, and exports. Our research employs the linear cointegration approach (ARDL) and the non-linear method (NARDL) from 1970 to 2021, with a focus on Libya. The analysis will demonstrate that healthy capital, consumer, and raw material markets are prerequisites for economic growth. Consequently, economic growth necessitates the availability of additional resources. The government must implement a price stabilization program with all relevant stakeholders to achieve the desired trade balance. The substitution of domestic products for imported goods has the potential to improve the nation's trade balance.