Causal Relationship between Gross Domestic Product and Agricultural Production in Libya (1970-2012)

Abstract

This paper is empirically investigated the causal relationships between gross domestic product and agricultural production in Libya by using annual time series data during the period (1970 to 2012). Granger causality, cointegration, and error correction techniques were used in order to determine the long run equilibrium relationship and the direction of the causality in both short run and long run. The cointegration test indicated the existence of long run equilibrium relationship between agricultural production and the Gross Domestic Product. The causality test based on error correction techniques indicated that there is an unidirectional causality relationship between agricultural production and the Gross Domestic Product in the short run. This result means that the agricultural sector in Libya is expected to play a major role in the future to determine the growth rate of the economy with further expected development of the agricultural sector.