The Impact of Security Instability on Local Currency Exchange Rate Fluctuations and Its Simulation in Both Official and Black

This studyinvestigates the impact of securityfactors on the depreciation of the local currency and forecastsits exchange rate in both the official and black markets. The researchemploys the Johansencointegration technique to estimate the long-termrelationship and the VectorError Correction Model (VECM) for short-termanalysis, utilizingdaily data fromJanuary 2018 to August 2024. Additionally, the studyapplies the Triple ExponentialSmoothing (DES, ESE, H-W withoutseasonality, H-W Additive Seasonal, and H-W Multiplicative Seasonal) method to forecast the periodfrommid-August 2024 to mid-August 2025. The findingsindicatethatsecurityinstability (D2), driven by conflicts, has a significant long-termeffect on the value of the Libyan dinar. Similarly, securityinstability (D3), caused by kidnappings and hostage situations, negatively influences the value of the local currency over the long term. The local currencyisprojected to continue depreciating in the official market, reachingapproximately 6.9 dinars per dollar by August 2025. On the black market, itisexpected to rise to around 8.50 dinars per dollar by early August 2025.