Imported and local inflation in the Libyan economy

Price channel versus cost channel

Abstract

The main aim of this study was to investigate the nature of relationship between imported inflation and local inflation in the Libyan economy. With distinguish between price and cost channels. In order to achieve its objective, the study used a time series data, and adopted ARDL model. The basic findings of the study indicated that imported inflation positively contribute in local inflation in the Libyan economy, both in short and long run. Furthermore, the price channel was stronger than cost channel in transforming inflation into the Libyan economy in the short run. However, in the long run cost channel was the strongest.