Acta Univ. Agric. Silvic. Mendelianae Brun. 2016, 64(6), 1869-1878 | DOI: 10.11118/actaun201664061869

Modelling the Impact of Fiscal Policy on Non-Oil Gdp in a Resource Rich Country: Evidence from Azerbaijan

Khatai Aliyev1, Bruce Dehning2, Orkhan Nadirov3
1 Institute for Social Sciences and Humanities, Qafqaz University, Khirdalan, Azerbaijan; Institute of Control Systems, Azerbaijan National Academy of Sciences, Baku, Azerbaijan
2 Argyros School of Business and Economics, Chapman University, Orange, California, United States
3 Faculty of Management and Economics, Tomas Bata University in Zlin, Zlin, Czech Republic

This paper analyses the impact of public expenditures and tax revenues on non-oil economic growth in Azerbaijan for the period of 2000Q1-2015Q2 by employing OLS, ARDL, FMOLS, DOLS, CCR and Granger Causality techniques. Different cointegration methods result in consistent results. In this study, there is strong evidence of significant long-run positive contributions from public expenditures to non-oil sector output. Results also show that tax revenues significantly slow down non-oil economic growth in the long run. Granger Causality analysis finds the existence of a bidirectional short-run association between non-oil GDP and public expenditures, while tax revenues Granger Cause both variables. The research findings should be useful for Azerbaijan fiscal policy makers to consider now and in the future. Current plans in Azerbaijan for both public expenditure cuts and tax revenue increases are likely to cause contraction in the Azerbaijan's non-oil sector GDP.

Keywords: Non-oil GDP, public expenditures, tax revenues, fiscal contraction, Azerbaijan

Prepublished online: December 21, 2016; Published: January 1, 2017  Show citation

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Aliyev, K., Dehning, B., & Nadirov, O. (2016). Modelling the Impact of Fiscal Policy on Non-Oil Gdp in a Resource Rich Country: Evidence from Azerbaijan. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 64(6), 1869-1878. doi: 10.11118/actaun201664061869
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