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

Famil Majidli and Hasraddin Guliyev
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Famil Majidli: Department of Economics and Business Administration, Azerbaijan State University of Economics, Baku, Azerbaijan,

International Journal of Energy Economics and Policy, 2020, vol. 10, issue 5, 123-130

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.

Keywords: oil price; non-oil GDP; exchange rate; fully modified ordinary smallest square approach; cointegration analysis; Azerbaijan (search for similar items in EconPapers)
JEL-codes: C22 E32 E37 Q43 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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