Interconnectedness of Libyan Financial and Real Sectors

Abstract

The Global Financial Crisis of 2008 has motivated modern economists to investigate the link between economies as well as between real and financial sectors. Thus, in last decade the existence of real and financial connectedness has become a corner stone in policy making when understanding how financial shocks impact real economy (Uluceviz & Yılmaz, 2018). Therefore, the aim of this chapter is to analyse the interconnectedness between the real and financial sectors of Libya. To accomplish the chapter’s aim, firstly it discusses roles of real and financial sector. Secondly, this chapter shed light on a recent related empirical literature. Methods used in measuring the connectedness between financial and real sectors are drown thirdly. In the fourth section, this chapter illustrates the method used and the model for measuring the Libyan real and financial sectors dependency, in addition to variables selection. Fifthly, our empirical results are displayed. Finally, a conclusion will be highlighted.

Keywords

• Finance
• Financial Sector
• Real Sector

References

1. Abedifar, P., Giudici, P., & Hashem, S. Q. (2017). Heterogeneous market structure and systemic risk: Evidence from dual banking systems. Journal of Financial Stability, 33, 96–119. https://doi.org/10.1016/j.jfs.2017.11.002
2. Acemoglu, D., Carvalho, M. C., Ozdaglar, A., & Tahbaz‐Salehi, A. S. (2012). The Network Origins of Aggregate Fluctuations. Econometrica, 80(5), 1977–2016. https://doi.org/10.3982/ecta9623
3. Acemoglu, D., Ozdaglar, A., & Tahbaz-Salehi, A. (2015). Systemic risk and stability in financial networks. American Economic Review, 105(2), 564–608. https://doi.org/10.1257/aer.20130456
4. Agosto, A., & Cafferata, A. (2020). Financial bubbles: A study of co-explosivity in the cryptocurrency market. Risks, 8(2), 1–14. https://doi.org/10.3390/risks8020034
5. Ahelegbey, D. F., Billio, M., & Casarin, R. (2016). Bayesian Graphical Models for STructural Vector Autoregressive Processes. Journal of Applied Econometrics, 31(2), 357–386. https://doi.org/10.1002/jae.2443
6. Anand, K., Gai, P., Kapadia, S., Brennan, S., & Willison, M. (2013). A network model of financial system resilience. Journal of Economic Behavior and Organization, 85(1), 219–235. https://doi.org/10.1016/j.jebo.2012.04.006
7. Andrieş, A. M., Ongena, S., Sprincean, N., & Tunaru, R. (2022). Risk spillovers and interconnectedness between systemically important institutions. Journal of Financial Stability, 58. https://doi.org/10.1016/j.jfs.2021.100963
8. Ankargren, S., Bjellerup, M., & Shahnazarian, H. (2017). The importance of the financial system for the real economy. Empirical Economics, 53(4), 1553–1586. https://doi.org/10.1007/s00181-016-1175-4

9. Antonakakis, N., Gabauer, D., Gupta, R., & Plakandaras, V. (2018). Dynamic connectedness of uncertainty across developed economies: A time-varying approach. Economics Letters, 166(February), 63–75. https://doi.org/10.1016/j.econlet.2018.02.011
10. Anyanwu, C. M. (2010). An overview of current banking sector reforms and the real sector of the Nigerian economy. Central Bank of Nigeria Economic and Financial Review, 48(4), 31–56.
11. Battiston, S., & Martinez-Jaramillo, S. (2018). Financial networks and stress testing: Challenges and new research avenues for systemic risk analysis and financial stability implications. Journal of Financial Stability, 35, 6–16. https://doi.org/10.1016/j.jfs.2018.03.010
12. Biljanovska, N., Grigoli, F., & Hengge, M. (2017). Fear thy neighbor: Spillovers from economic policy uncertainty (2017/240; 240). https://doi.org/10.1111/roie.12531
13. Bricco, J., & Xu, T. (2019). Interconnectedness and Contagion Analysis: A Practical Framework. International Monetary Fund. https://doi.org/10.2139/ssrn.3491243 Central Bank of LIBYA. (n.d.). Monetary and Financial Statistics (1966-2017).
14. Diebold, F. X., & Yilmaz, K. (2009). Measuring Financial Asset Return and Volatility Spillovers, With Application To Global Equity Markets. The Economic Journal, 119(534), 158–171.
15. Diebold, F. X., & Yilmaz, K. (2012). Better to give than to receive: Predictive directional measurement of volatility spillovers. International Journal of Forecasting, 28(1), 57–66. https://doi.org/10.1016/j.ijforecast.2011.02.006
16. Gai, P., Haldane, A., & Kapadia, S. (2011). Complexity, concentration and contagion. Journal of Monetary Economics, 58(5), 453–470. https://doi.org/10.1016/j.jmoneco.2011.05.005
17. Gai, P., & Kapadia, S. (2010). Contagion in Financial Networks. In Proceedings of the Royal Society A: Mathematical, Physical and Engineering Sciences (Issue 383). https://doi.org/10.2139/ssrn.1577043
18. Giudici, P., Sarlin, P., & Spelta, A. (2020). The interconnected nature of financial systems: Direct and common exposures. Journal of Banking and Finance, 112, 105149. https://doi.org/10.1016/j.jbankfin.2017.05.010
19. Giudici, P., & Spelta, A. (2016). Graphical Network Models for International Financial Flows. Journal of Business & Economic Statistics, 34(1), 128–138.
20. Giudici, Paolo, & Pagnottoni, P. (2020). Vector error correction models to measure connectedness of Bitcoin exchange markets. Applied Stochastic Models in Business and Industry, 36(1), 95–109. https://doi.org/10.1002/asmb.2478
21. Glasserman, P., & Young, H. P. (2016). Contagion in financial networks. Journal of Economic Literature, 54(3), 779–831. https://doi.org/10.1257/jel.20151228
22. Greene, J. E. (2018). Introduction To Macroeconomic Accounts, Analysis, And Related Policy Issues. In World Scientific Book Chapters (pp. 1–17).
23. Greenwood, R., Landier, A., & Thesmar, D. (2015). Vulnerable banks. Journal of Financial Economics, 115(3), 471–485. https://doi.org/10.1016/j.jfineco.2014.11.006
24. Ibadin, L. A., Moni, O. M., Eikhmun, D. E., & Accounting. (2014). Real Sector , Gross Fixed Capital Formation and the Nigerian Stock Market. European Journal of Business and Management, 6(33), 157–168.
25. Kaur, K. (2017). Financial Sector Reforms. International Journal Of Business Management, 3(1).
26. Kendirli, S., & Şenol, F. Y. (2021). Crypto Currencies in the Framework of Chaos Theory and the Relationship of Crypto Currency with Big Exchanges. Quantrade Journal of Complex Systems in Social Sciences, 3(2), 15-23.
27. Kendirli, S., Şenol, F. Y., & Ergenoğlu, S. (2022). Analysis oF The Relationship Between Cryptocurrency Index (CCi30), BIST 100, and NASDAQ with Granger Causes Test. Quantrade Journal of Complex Systems in Social Sciences, 4(2), 35-43.
28. Klimenko, P., Sevryukova, L., Goncharenko, M., & Dmitriev, D. (2021). Financial mechanisms to stimulate the real economy in the global economic security system. SHS Web of Conferences, 92, 08011. https://doi.org/10.1051/shsconf/20219208011
29. Konak, F., & Özkahveci, E. (2023). Blockchaın Üzerine Yeni Bir Halka: Non-Fungıble Token (Nft)’Nin Bilinirliği Üzerine Bir Araştırma. Düzce Üniversitesi Sosyal Bilimler Dergisi, 13(1), 97-115. Https://Doi.Org/10.55179/Dusbed.1193852
30. Krippner, G. (2011). Capitalizing on crisis: The political origins of the rise of finance. Harvard University Press.
31. Levine, R. (2004). Finance Growth Theory Evidence. Nber Working Paper Series, 10766, 1–118.
32. Li, L., Zhang, N., & Willett, T. D. (2012). Measuring macroeconomic and financial market interdependence: a critical survey. Journal of Financial Economic Policy, 4(2), 128–145. https://doi.org/10.1108/17576381211228989
33. Malik, S., & Xu, T. (2017). Interconnectedness of Global Systemically-Important Banks and Insurers. In IMF Working Papers (Vol. 17, Issue 210). https://doi.org/10.5089/9781484320716.001
34. Markose, S., Giansante, S., & Shaghaghi, A. R. (2012). Too interconnected to fail’ financial network of US CDS market: Topological fragility and systemic risk. Journal of Economic Behavior and Organization, 83(3), 627–646. https://doi.org/10.1016/j.jebo.2012.05.016
35. Mordi, C. N. (2014). The link between the financial (banking) sector and the real sector of the Nigerian economy. Economic and Financial Review, 84(4), 205–214.Research and Statistics Department. (2021). Economic Bulletin Vol.No. 61 Fourth Quarter 2021.
36. Ulusoy, T. (2008). Systematic Risk and Firm Financial Structure: Evidence on Istanbul Stock Exchange. The Business Review, Cambridge, 11(2), 226-231.
37. Uluceviz, E., & Yılmaz, K. (2018). Measuring real-financial connectedness in the U . S . economy (Issue 1812).
38. Ulusoy,T. and Ugur, S. O.(2020). "The Effect of Macroeconomic Factors on the Detection Value of the Firm: An Application in Istanbul Stock Exchange," International Journal of Economics, Business and Management Studies, Online Science Publishing, vol. 7(2), pages 224-233.
39. Ulusoy, T., Saeed, M.and Kaplan Dönmez,N.F. (2022). “The Mediating Role Of Innovation On The Relationship Between The Board Information Technology Governance And Firm Performance: Theoretical Approach:”,International SocialMentality andResearcher ThinkersJournal, (Issn:2630-631X) 8(59): 841-848
40. Zhuang, J., Gunatilake, H., Niimi, Y., Khan, M. E., Jiang, Y., Hasan, R., Khor, N., Lagman-Martin, A. S., Bracey, P., &
41. Huang, B. (2009). Financial sector development, economic growth, and poverty reduction: A literature review. ADB Economics Working Paper Series, 173, 1–48.