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How Oil Price and Exchange Rate Affect Non-oil GDP of the Oil-rich Country Azerbaijan?

Author

Listed:
  • Famil Majidli

    (Department of Economics and Business Administration, Azerbaijan State University of Economics, Baku, Azerbaijan,)

  • Hasraddin Guliyev

    (Department of Economics and Business Administration, Scientific-Research Institute of Economic Studies, Azerbaijan State Economic University, Baku, Azerbaijan.)

Abstract

Identifying the economic factors that affect economic growth is an important issue for each economy. It is a matter of debate to determine the building blocks of non-oil GDP growth, especially in oil-rich countries, such as Azerbaijan. Using the Fully Modified Ordinary Smallest Square approach between 2005-2019, this study aims to investigate the relationship between real non-oil GDP growth of Azerbaijan and exchange rate and oil prices. Zivot-Andrews unit root test is applied to deal with structural breaks in data and the Gregory-Hansen test for robustness. While conventional unit-root tests decision that the series are not stationary at their level, the Ziwot-Andrews test decision that the series is stationary with structural break. According to the Gregory-Hansen test result, there is a structural break date in the long-run relationship between the real non-oil GDP growth and the oil price and the USD /AZN exchange rate in early 2009. According to FMOLS results, the increase in oil price increases real non-oil GDP growth, and the increase in USD / AZN exchange rate has a decreasing effect on it. This study contains considerable information for future economic policies for oil-rich countries that want to develop the non-oil sector.

Suggested Citation

  • Famil Majidli & Hasraddin Guliyev, 2020. "How Oil Price and Exchange Rate Affect Non-oil GDP of the Oil-rich Country Azerbaijan?," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 123-130.
    • Handle: RePEc:eco:journ2:2020-05-16
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    References listed on IDEAS

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    Cited by:

    1. Nigar Huseynli, 2022. "Impact of Revenues from Oil and Non-Oil Sectors on the Economic Growth of Azerbaijan," International Journal of Energy Economics and Policy, Econjournals, vol. 12(5), pages 31-35, September.
    2. Shafa Guliyeva, 2023. "Analysis of the effect of Energy Prices on Stock Indexes During the Epidemic Crisis," International Journal of Energy Economics and Policy, Econjournals, vol. 13(2), pages 526-536, March.
    3. Ivan Aleksandrovich Kopytin & Nikolay Petrovich Pilnik & Ivan Pavlovich Stankevich, 2021. "Modelling Five Variables BVAR for Economic Policies and Growth in Azerbaijan, Kazakhstan and Russia: 2005 2020," International Journal of Energy Economics and Policy, Econjournals, vol. 11(5), pages 510-518.
    4. Faiez Ahmed Elneel & Abdullah Fahad AlMulhim‎, 2022. "The Effect of Oil Price Shocks on Saudi Arabia’s Economic Growth in the Light of Vision 2030 “A Combination of VECM and ARDL Models”," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(4), pages 3401-3423, December.
    5. Nurkhodzha Akbulaev & Elshan Mammadli & Gadir Bayramli, 2022. "The Effect of Energy Prices on Stock Indices in the Period of COVID-19: Evidence from Russia, Turkey, Brazil, and India," International Journal of Energy Economics and Policy, Econjournals, vol. 12(3), pages 262-269, May.

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    More about this item

    Keywords

    oil price; non-oil GDP; exchange rate; fully modified ordinary smallest square approach; cointegration analysis; Azerbaijan;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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