Estimating The Impact of Macroeconomic Variables on The Financial Performance of Libyan Commercial Banks

Abstract

This study attempts to estimate the impact of macroeconomic variables on the financial performance of Libyan commercial banks during the period (1990-2023), by using a standard model based on the bounds tests for joint integration (Bounds test), and the (ARDL) model, which are usually applied to estimate such relationships. Results of the study show that there is a joint integration relationship between study variables in the long run. The results reveal an existence of adverse effects of inflation rates and foreign exchange rate on a financial performance of a banking sector, while the effect is positive for public expenditure. These results are consistent with economic theory. Accordingly, there must be a coordination between economic policies, represented by the state’s fiscal and monetary policies.