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How to Conceptualize the Resource Curse and Dutch Disease Theories in the Case of Azerbaijan? Initial and Negative Findings

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  • Niftiyev, Ibrahim

Abstract

Azerbaijan's economy is extractive industry-led and not well-diversified. A comprehensive understanding of the role of the oil industry in the Azerbaijani economy is still a desideratum. Azerbaijan's national economy was a popular case study for the theories such as the natural resource curse (NRS) and Dutch disease (DD); however, a conclusive statement is yet to be found. Many new questions arise as the impact of the crisis periods, institutions, and monetary indicators are being explored. This working paper is nothing more than experimentation results for the Azerbaijan economy within the NRS and DD theories. Surely, not everything can be achieved from the first trial and sound accomplishments need to be built on the shoulders of the negative results and failed hypotheses tests following the already existing analytical frameworks. Despite data issues and lack of proper theoretical conceptualizations of the Azerbaijan economy, this working paper reports the results of the Ordinary Least Squares (OLS) and Robust Least Squares (RLS) to orient the follow-up studies in the near future. Despite academia argues that nowadays linear relationships are hard to obtain, this working paper's main assumption is still a linear association among the variables of interest. Despite the results from this working paper are mixed, particular negative associations between the institutional quality measured via the several political, institutional, and governance indicators, and oil-related variables are present in the case of Azerbaijan between 1996–2019. To explain, although the negative impacts of the real effective exchange rate (REER), REER growth rates, the nominal effective exchange rate (NEER), and NEER growth rates were less than expected, oil prices and changes in oil prices played a great role (negative) in the output, employment, and returns on capital in the Azerbaijani economy. Moreover, particular negative associations between the oil-related variables, and institutional, political, and governance indicators are present, whereas the quantity and quality of the education in the Azerbaijan economy do not fully reflect any serious negative impacts. These experimental models possess a high amount of stability; however, they should be treated as initial starting points. The mentioned facts must be considered by the policymakers when the non-oil development of the Azerbaijani economy is being discussed.

Suggested Citation

  • Niftiyev, Ibrahim, 2021. "How to Conceptualize the Resource Curse and Dutch Disease Theories in the Case of Azerbaijan? Initial and Negative Findings," EconStor Preprints 234576, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:234576
    DOI: 10.2139/ssrn.3857936
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    References listed on IDEAS

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    1. Thomas De Waal, 2012. "A Broken Region: The Persistent Failure of Integration Projects in the South Caucasus," Europe-Asia Studies, Taylor & Francis Journals, vol. 64(9), pages 1709-1723.
    2. Cockx, Lara & Francken, Nathalie, 2016. "Natural resources: A curse on education spending?," Energy Policy, Elsevier, vol. 92(C), pages 394-408.
    3. Bayramov, Vugar & Abbas, Gulnara, 2017. "Oil shock in the Caspian Basin: Diversification policy and subsidized economies," Resources Policy, Elsevier, vol. 54(C), pages 149-156.
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    1. Iryna Sotnyk & Tetiana Kurbatova & Oleksandr Kubatko & Olha Prokopenko & Gunnar Prause & Yevhen Kovalenko & Galyna Trypolska & Uliana Pysmenna, 2021. "Energy Security Assessment of Emerging Economies under Global and Local Challenges," Energies, MDPI, vol. 14(18), pages 1-20, September.
    2. Ganira Ibrahimova & Petra Moog, 2023. "Colonialism versus independence—the role of entrepreneurial ecosystems in Azerbaijan over time," Small Business Economics, Springer, vol. 61(3), pages 1289-1336, October.

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