The Impact of Economic Variables on the Profitability of Libyan Commercial Banks: An Econometric Study of (Al-Jumhouria Bank - United Bank for Commerce and Investment)

Abstract

This study aims to analyze the impact of macroeconomic variables, namely exchange rate and inflation, on the profitability of Libyan commercial banks. The study is applied to Jumhouria Bank and United Bank for Commerce and Investment over the period from 2008 - 2024. The study adopts the descriptive-analytical approach to examine the performance of commercial banks during the study period. In addition, an econometric approach was employed to test the study hypotheses using panel data that combine both cross-sectional and time-series dimensions, covering two commercial banks over a 17-year period. Multiple linear regression analysis was applied to examine the relationship between the independent variables (exchange rate and inflation) and the dependent variables representing profitability indicators, namely Return on Assets (ROA) and Return on Equity (ROE), using stata software. The findings indicate that macroeconomic variables have a statistically significant impact on the profitability of Libyan commercial banks, with varying degrees of influence, reflecting the sensitivity of the banking sector to macroeconomic fluctuations. The study recommends adopting more stable monetary and financial policies and strengthening risk management tools within banks to mitigate the effects of exchange rate and inflation volatility on financial performance.