Modelling Elasticity of Non-Oil Tax Revenues to Oil Price Changes: is There U-Shaped Association? Evidence from Azerbaijan

Khatai Aliyev, Altay Ismayilov and Ilkin Gasimov

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2019, vol. 67, issue 3, 799-810

Abstract: Oil price changes has a great influence on the behaviour of firms in oil exporting countries which displays itself in amount of non-oil tax receipts of the state budget. Employing FMOLS, DOLS, and CCR cointegration methods for 2001Q1-2015Q4, the study aims to analyse how oil price changes affects non-oil tax revenues in Azerbaijan. Empirical results altogether provide strong scientific evidence that there is U-shaped causality from oil price changes to total non-oil tax revenues , corporate income tax receipts and labour income tax payments , and inverse U-shaped to non-oil VAT revenues of the state budget. Results show that firms face with the trade-off between "produce-and-sell" and "import-and-sell" as oil price rises. In case of higher price than the threshold level, companies prefer the latter choice. Research findings are highly useful for the public policy decision-makers in resource rich economies.

Keywords: oil price changes; firm behaviour; non oil sector; tax revenues; threshold level; produce and sell; import and sell; natural resources (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mup:actaun:actaun_2019067030799

DOI: 10.11118/actaun201967030799

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