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Economies 2017, 5(2), 19; doi:10.3390/economies5020019

Management of Oil Revenues: Has That of Azerbaijan Been Prudent?

1
Department of World Economy, Baku Engineering University, Baku AZ0101, Azerbaijan
2
Department of Economics, University of Southern California, Los Angeles, CA 90089, USA
3
Department of Statistics, Azerbaijan State University of Economics (UNEC), Baku AZ1001, Azerbaijan
4
Institute for Scientific Research on Economic Reforms, Baku AZ1011, Azerbaijan
*
Author to whom correspondence should be addressed.
Academic Editor: Abdur Chowdhury
Received: 20 December 2016 / Revised: 23 May 2017 / Accepted: 31 May 2017 / Published: 12 June 2017
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Abstract

To help explain the common failure of oil or other natural resource exporting countries to diversify into industry, it has been common to trace this failure to real exchange rate appreciation. This has also been done in Azerbaijan. However, because Azerbaijan has devoted so much of its oil revenues to government investment, Azerbaijan provides a suitable case for examining an alternative link through government investment. This study applies the ARDL cointegration method to quarterly time series data on oil prices, government capital formation, non-oil exports and non-oil GDP to estimate the long run relationships linking oil prices to government investment expenditures and further to generation of non-oil GDP. The results show that despite the massive government investment expenditures, extremely little non-oil production of the tradable type has been generated, calling attention to the need for policy reform. View Full-Text
Keywords: oil windfall gains; government capital expenditures; non-oil diversification; industrial policy; sovereign wealth funds; Azerbaijan oil windfall gains; government capital expenditures; non-oil diversification; industrial policy; sovereign wealth funds; Azerbaijan
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Gurbanov, S.; Nugent, J.B.; Mikayilov, J. Management of Oil Revenues: Has That of Azerbaijan Been Prudent? Economies 2017, 5, 19.

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