Estimating Potential Non-Oil GDP in Azerbaijan

Avaz Yusibov, Tural Yusifzada () and Vugar Ahmadov
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Tural Yusifzada: Central Bank of Azerbaijan Republic
Vugar Ahmadov: Central Bank of Azerbaijan Republic

No 2501, Working Papers from Central Bank of Azerbaijan Republic

Abstract: This study assesses Azerbaijan’s non-oil potential growth and its interplay with capacity utilization and inflation dynamics. Utilizing multiple estimation techniques, non-oil potential output growth is consistently estimated at around 5%. While short-term GDP growth exceeding the estimated level might suggest overheating, firm-level data suggest otherwise. Drawing on monthly survey data from enterprises across various industrial sectors covering the period of 2019–2024, we find that elevated growth does not always lead to inflationary pressures, especially when firms operate below full capacity. In such cases, capacity utilization can increase without a significant cost increase. The findings of this study emphasize the importance of incorporating capacity utilization metrics into inflation monitoring and highlight the need for policy responses in emerging economies with structural supply-side constraints.

Keywords: potential growth; non-oil GDP; steady state growth; capacity utilization (search for similar items in EconPapers)
JEL-codes: D24 O40 O47 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2025-01-14
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Persistent link: https://EconPapers.repec.org/RePEc:aze:wpaper:2501

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