Azerbaijan and its oil resources: Curse or blessing?

We examine the relationship between oil price fluctuations and economic activity in Azerbaijan using vector autoregressive models for the period 2002Q1-2018Q4. Our key results are as follows. First, quarterly GDP growth decreases after oil price innovations in both, the oil and gas sector and in the remaining economy. Downturns (upswings) in the oil and gas sector also prompt downturns (upswings) in the non-oil sector as fluctuations in oil revenues affect the government's capacity to subsidize the remaining economy. Second, oil price innovations also lead to higher inflation in Azerbaijan. In... Mehr ...