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Why Had the Money Market Approach Been Irrelevant in Explaining Inflation in Azerbaijan During the Rapid Economic Growth Period?Hasanov FakhriQafqaz Univeristy, Center for Socio-Economic Research; George Washington University, Research Program on Forecasting; Institute of Cybernetics, Department of Modeling Socio-Economic Processes Khudayar Hasanliaffiliation not provided to SSRN February 1, 2011 Journal of Middle Eastern Finance and Economics, No. 10, 2011 Abstract: The study examines whether inflation process can be explained within the framework of the Money Market Approach in the third stage of economic development of Azerbaijan economy covering 2004-2008. By employing dynamic modeling study concludes that the Money Market Approach has not been relevant for explaining Azerbaijani inflation. Because Azerbaijan, a resource rich small open economy in transition processes, has some stylized facts which are important to take into account in the analysis of the inflation. Since the Money Market Approach seems irrelevant one, the paper puts forward application of other alternative explanations for Azerbaijani inflation in the future. In this regard analyzing inflation in the context of resource dependence seems one of the relevant approaches due to high price increases mainly sourced from oil revenues.
Number of Pages in PDF File: 10 Keywords: Inflation rate, Money Market Approach, Transition economy, Resource Abundance, Oil and Non-oil Sectors, Econometric modeling, Azerbaijan JEL Classification: P24, Q33, C22 Accepted Paper SeriesDate posted: March 16, 2011Suggested CitationContact Information
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