How Fiscal Policy Affects Non-oil Economic Performance in Azerbaijan?

Aliyev, K., & Nadirov, O. (2016). How fiscal policy affects non-oil economic performance in Azerbaijan?. Academic Journal of Economic Studies, 2(3), 11-29.

19 Pages Posted: 30 Jul 2020

See all articles by Khatai Aliyev

Khatai Aliyev

Azerbaijan State University of Economics (UNEC); Baku Engineering University

Date Written: 2016

Abstract

The role of fiscal policy in promoting economic growth has been subject to many studies since its suggestion by Keynes who stated expansionary/contractionary impact of public expenditures/taxes. In this context, effectiveness of fiscal policy use to develop non-oil sector in resource rich economies should be studied. This paper investigates short- and long-run effects of budget expenditures and tax-related budget revenues (direct transfers from oil fund excluded) over non-oil GDP while controlling for oil price volatility and oil production in case of Azerbaijan. Autoregressive Distributed Lag Bounds Testing (ARDLBT) Approach to cointegration is employed for data covering 2000Q1-2015Q2. Estimation results theoretically consistent and statistically significant long-run effects of both budget expenditures and tax-related budget revenues. However, in the short-run, the effects are contrary to the theoretical expectations. Findings are useful for Azerbaijan fiscal policy makers especially in the current complicated nature of economic processes in the economy due to oil related challenges.

Keywords: Fiscal policy; non-oil GDP; budget expenditures; tax revenues; Azerbaijan

JEL Classification: H11; H20; H61; H71

Suggested Citation

Aliyev, Khatai, How Fiscal Policy Affects Non-oil Economic Performance in Azerbaijan? (2016). Aliyev, K., & Nadirov, O. (2016). How fiscal policy affects non-oil economic performance in Azerbaijan?. Academic Journal of Economic Studies, 2(3), 11-29., Available at SSRN: https://ssrn.com/abstract=3643333

Khatai Aliyev (Contact Author)

Azerbaijan State University of Economics (UNEC) ( email )

Istiglaliyyat street 6
Baku, AZ Az1001
Azerbaijan

Baku Engineering University ( email )

Hasan Aliyev str. 120
Khirdalan, Baku AZ 0101
Azerbaijan

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