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Export diversification and the S-curve effect in a resource-rich state: evidence from Azerbaijan

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  • Mohsen Bahmani-Oskooee

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  • Rustam Jamilov

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Abstract

Resource-rich states often miss out on diversified export-led growth opportunities due to their overreliance on resource-generated revenues. One strategy to boost non-resource exportation is to temporarily devalue the domestic currency and to provide exporters with some price competitiveness. This paper applies the notion of currency devaluation to the issue of export diversification via the S-curve principle. A comprehensive analysis of aggregate, bilateral, and industry-level trade is employed for Azerbaijan—a country-model for resource-abundant states with underdeveloped non-oil sectors. Consistent and strong evidence in favor of the S-curve effect is found in all stages of our analysis. In particular, a depreciative shock to the exchange rate correlates positively with the balance of trade on the aggregate and bilateral levels, as well as in 16 of the 20 industries examined. Results confirm previous literature findings. Azerbaijan’s non-oil exportation responds to a depreciated Manat in a systematically positive way, which adds further value to the argument of using currency devaluations for export diversification in resource-rich economies. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Mohsen Bahmani-Oskooee & Rustam Jamilov, 2014. "Export diversification and the S-curve effect in a resource-rich state: evidence from Azerbaijan," Economic Change and Restructuring, Springer, vol. 47(2), pages 135-154, May.
    • Handle: RePEc:kap:ecopln:v:47:y:2014:i:2:p:135-154
    DOI: 10.1007/s10644-013-9145-8
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    References listed on IDEAS

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    Cited by:

    1. Niftiyev, Ibrahim, 2020. "Analysis of Inflation Trends in Urban and Rural Parts of Azerbaijan: Main Drivers and Links to Oil Revenue," EconStor Preprints 226217, ZBW - Leibniz Information Centre for Economics.
    2. José Fuinhas & António Marques & Alcino Couto, 2015. "Oil rents and economic growth in oil producing countries: evidence from a macro panel," Economic Change and Restructuring, Springer, vol. 48(3), pages 257-279, November.
    3. Bayramov, Vugar & Abbas, Gulnara, 2017. "Oil shock in the Caspian Basin: Diversification policy and subsidized economies," Resources Policy, Elsevier, vol. 54(C), pages 149-156.

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    More about this item

    Keywords

    Resource curse; Export diversification; S-curve; F14; F31; F43;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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