Dutch disease-led de-industrialization in the Azerbaijan’s economy

Niftiyev, İbrahim

doi:10.14232/phd.11574

Cited by 2 publications

(3 citation statements)

References 303 publications

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“…These results are consistent with those of Niftiyev (2021), Czech (2020), andNiftiyev (2022b), who found a clear relationship between subsectors vegetable and chemical subsectors and their susceptibility to Dutch disease and related phenomena in the context of the dynamics of the oil boom in Azerbaijan. Although it is important to emphasize that this study is a correlational design and causal conclusions should be drawn with caution, it is still possible to note agreement with the findings of Hasanov (2013) and Hasanov and Samadova (2010).…”

Section: Discussionsupporting

confidence: 91%

De-industrialization in Azerbaijan's Textile Subsectors: Canonical Correlation Analysis and the Dutch Disease Hypothesis

Niftiyev

2023

JATSS

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Since 2014, academic studies have increasingly underscored the potential adverse consequences associated with Azerbaijan's imbalanced and dependent economic structure. It is widely recognized that countries relying heavily on the export of primary commodities are ill-prepared for situations characterized by sharp declines in international commodity prices. Hence, the objective of this paper is to examine the Azerbaijani economy amidst two parallel developments: the growth of oil-related macroeconomic indicators and the contraction of non-oil subsectoral industrial production. To achieve this, the analytical framework of the Dutch disease, a widely preferred theory to study commodity exporters, and canonical correlation analysis (CCA) were employed in the period 1995 to 2021. The findings reveal statistically significant canonical correlations between certain subsectors of the textile industry (such as ginned cotton, cotton fabric, silk fabric, bed linen of cotton, and cotton yarn) and the Dutch disease variables (e.g., oil rent, real effective exchange rate), while other subsectors (including carpets, crocheted legwear and garments, outerwear, underwear, and footwear) do not exhibit similar patterns. These results show that non-consumer subsectors of the textile subsectors, especially the cotton sector, are more vulnerable to the effects of Dutch disease than consumer subsectors of the textile subsectors. In addition, the oil rent variable is a persistent channel that shows a negative correlation with the latent variables of the textile subsectors. These results prompt policymakers and researchers to reassess the role of large extractive industries in a small, open economy like Azerbaijan and to formulate economic policies that safeguard and foster specific subsectors.

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Section: Discussionsupporting

confidence: 91%

De-industrialization in Azerbaijan's Textile Subsectors: Canonical Correlation Analysis and the Dutch Disease Hypothesis

Niftiyev

2023

JATSS

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“…The use of a mixed-methods approach in one recent study further demonstrated that specific non-oil industries in Azerbaijan, such as chlorine, soda, and sulfuric acid, have experienced de-industrialisation due to DD (Niftiyev, 2022). Various obstacles, such as exchange rate appreciation (Majidli, 2022), deficiencies in fiscal policy management of oil wealth (Ahmadov, 2022), and slow and ineffective industrial diversification (Guliyev, 2022), further confirm the undeniable presence of DD.…”

Section: Dutch Disease In the Azerbaijani Economymentioning

confidence: 98%

“…The phenomenon of DD was initially brought to attention through early studies conducted by Rosenberg and Saavalainen (1998), Gahramanov andFan (2002), andMahmudov (2002), all of which emphasised the upcoming challenges stemming from inadequate political will and government capacity in managing oil wealth in Azerbaijan. Building upon this foundation, more comprehensive studies by Hasanov (2013), Guliyev (2013), andNiftiyev (2022) have provided detailed insights into the exact impact of DD-related variables on the non-resource manufacturing and agricultural sectors, revealing a strong correlation with international oil prices and resulting growth-reducing effects in Azerbaijan. Consequently, Azerbaijan stands as a prominent example of an oil-dependent country with an unbalanced industrial capacity that hinders the achievement of sustainable growth rates and rendering it susceptible to shocks in global commodity prices.…”

Section: Dutch Disease In the Azerbaijani Economymentioning

confidence: 99%

Unveiling the Dutch Disease Indexes: Principal Component Analysis in a Small Oil-rich Country

Niftiyev

2024

Period. Polytech. Soc. Man. Sci.

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The Dutch disease (DD) theory is a popular approach when analyzing the economies of resource-rich countries. However, despite the extensive examination of both the original DD theory and its variations in numerous country cases, the findings remain contradictory and inconclusive, primarily due to the challenges associated with measuring DD. Building upon the notable case study of the Azerbaijani economy, this paper introduces a novel way to utilise principal component analysis (PCA) in index development, which incorporates the modelling framework of the original theory and provides a profound understanding of DD measurement. The findings of the study reveal that the fundamental variables associated with DD in the Azerbaijani economy can be effectively condensed into a small number of principal components (PCs). In addition, this research introduces not only a total Dutch disease index (TDDI), but also a resource movement index (RMI) and a spending index (SI), with the last of these demonstrating a more pronounced impact in Azerbaijan. The estimated indexes exhibit a significant and negative correlation with the manufacturing sector’s share in the industry, pointing to the presence of the crowding-out mechanism of DD. Moreover, a strong positive correlation is observed with key growth indicators such as gross domestic product (GDP) and gross capital formation, underscoring the exceptional role of the oil boom in the Azerbaijani economy. These findings justify the contention that DD is present in the Azerbaijani economy. The paper also provides a composite index that can be utilised by both policymakers and scholars for measuring DD.

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Dutch disease-led de-industrialization in the Azerbaijan’s economy

Cited by 2 publications

References 303 publications

De-industrialization in Azerbaijan's Textile Subsectors: Canonical Correlation Analysis and the Dutch Disease Hypothesis

De-industrialization in Azerbaijan's Textile Subsectors: Canonical Correlation Analysis and the Dutch Disease Hypothesis

Unveiling the Dutch Disease Indexes: Principal Component Analysis in a Small Oil-rich Country

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