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After the painful transition process from a command economy to a market economy, Azerbaijan used its rich hydrocarbon resources to promote economic growth and development. As a result, national income and per capita income soared, infrastructure improved, and poverty was reduced. However, Azerbaijan's economy seems to have been caught up in the negative effects of the oil boom. In other words, non-oil tradeable sectors such as manufacturing have not been able to build on the success and gain a high share of output, employment, and exports due to the increase in the real effective exchange rate (REER) and domestic prices. So far, the literature on studies of Dutch disease in the Azerbaijani economy has focused on highly aggregated data without properly separating the effects of Dutch disease, namely resource movement and spending effects. In this paper, the effects of resource movement were examined using manufacturing employment with a standard unrestricted vector autoregression (VAR). However, to ensure analytical accuracy, the spending effect was also considered. The results show that manufacturing employment responds positively to mining employment. However, when employment in the service sector increases, manufacturing employment shrinks, which is also negatively affected by oil prices and the appreciation of the REER. These results may be useful for policymakers to neutralize the impact of Dutch disease to ensure sustainable development goals and promote export-led growth policies in the manufacturing sector.

There is a growing body of literature on the possible presence of the Natural Resources Curse (NRC) and Dutch Disease Syndrome (DD) in the Azerbaijani economy. Because of its abundant hydrocarbon resources, Azerbaijan has pursued an oil-oriented strategy for economic growth and development. Certainly, this path has helped overcome serious economic problems such as extreme poverty, lack of capital accumulation, and technology adoption, but it is also believed that a lopsided economic structure hinders overall sustainable growth. Indeed, it has been noted that the high-value-added manufacturing sector is an engine for stable economic growth and that specialization in the primary sector (including oil and related commodities) can pose many challenges to developing countries. Over time, non-oil production has been neglected and volatile commodity prices have been allowed to determine macroeconomic stability in Azerbaijan. This has been a risky path and now requires a comprehensive investigation using widely accepted theories such as NRC and DD. This working paper presents the first results of an econometric and empirical linear analysis of the main NRC- and DD-related variables to shed light on the above phenomena. The main regression approach was a stepwise algorithm to find variable-specific functional relationships. The results are far from perfect and are experimental in nature. Although all conclusions should be drawn with caution, interested parties such as academics, professional economists, decision makers, or policy makers could benefit from the proposed conceptualization of NRC and DD in the Azerbaijani economy for their future studies.

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.

Is it possible to apply Principal Component Analysis (PCA) in the Azerbaijan economy? Before blindly answering the question, careful examination of the collected data and the relevance of the data set to the mentioned analysis should be checked. PCA is a widely used multivariate dimension reduction tool that statistical analysis employs. Nevertheless, its application area is limited. Also, PCA analysis in macroeconomic studies is not much preferred and in Azerbaijan's case, there is not one. To understand this methods' relevance two case studies, namely vegetable and fruit sectors have been chosen. The aim was to quantify the sub-sectoral performance via vegetable and fruit sectors. The collected data set and PCA analysis on it were evaluated from multiple angles to outline the roadmap for future investigations. The author argues that in line with the method's theoretical expectations, Azerbaijan's vegetable and fruit sectors partially fulfill the planned goals of the analysis. This means PCA is a highly useful analytical tool and might produce valuable sub-sectoral performance evaluations in the case of Azerbaijan. According to the produced indices, the vegetable sector performed better than the fruit sector from 1999 until 2015. However, between 2015-2020 fruit sector outperformed the vegetable sector. A similar analysis can be organized among the other sub-sectors or between sectors in the case of the Azerbaijan economy. Furthermore, this working paper embodies experimentation results, not conclusions about the methods' validity and justification. Hence, this work compares three rotations of PCA analysis (Varimax, Quartimax, and Equamax) and constructed indices separately for vegetable and fruit sectors.

Agriculture and agrarian sectors have been gone through the serious transformation process since the collapse of the Soviet Union in Azerbaijan. An ever-growing body of academic literature body investigated the resource curse and Dutch disease theories to conceptualize non-oil sectors in Azerbaijan starting from the late 1990s; however, the unanimous conclusion about the status of agriculture, agrarian sectors or manufacturing is still highly anticipated. Modern statistical techniques and accumulated data on the crucial economic indicators allow us to conceptualize the main trends and dynamics of agriculture and agrarian sectors in the context of resource-richness in Azerbaijan. This paper aims to descriptively investigate the collected data related to agriculture and agrarian sectors. Special emphasis has been put on the theoretical relevance of Dutch disease and resource curse to operationalize the research interest and research question. The findings of the correlation analysis show that there is a positive, significant, and strong association between the real effective exchange rate of Azerbaijan and international oil prices. The other findings demonstrate that mainly agriculture-related variables decreased their role in the Azerbaijan economy since 1991 but only value-added per worker gradually rose, also correlating negatively with value-added in agriculture and investments in agriculture.

Inflation is one of the most important economic indicators for a country. Understanding inflation based on the consumer spending patterns allows for better conceptualization of the phenomenon and improved policy responses for the unwanted developments, more precisely, increased price levels in consumer markets. The current working paper develops Consumer Price Index-based inflation indicator via the help of the Laspeyres price index in the case of Azerbaijan to evaluate the post-booming period (which is since 2011). Moreover, the significant results of correlation analysis between the Paasche Price Index and oil prices, oil revenue, and real effective exchange rate (REER) demonstrate initial signals about the urban and rural inflation dynamics and trends in the case of oil-rich Azerbaijan.

Oil booming and accumulated mineral revenue contributed to the economic growth in Azerbaijan since independence but also pressurized the national currency leading to the appreciation of the nominal effective exchange rate (NEER) and real effective exchange rate (REER). An increase in export prices makes them expensive, decreasing the competitiveness of the country. Azerbaijan’s recent decreased economic performance during 2014–2015 reflected a common reality among the resource exporting countries: relying on the primary sectors might jeopardize the national economy due to the extreme price volatility. The paper investigates the extension of the relationship between NEER, REER, and other export-related macroeconomic variables and agricultural exports to identify Azerbaijan’s non-oil sub-sectoral dynamics between 2001–2018 via the OLS estimations. The main findings indicate that NEER negatively impacted potato, fresh fruit, and fresh vegetable exports. Moreover, potato and fresh fruit exports demonstrated more stable export dynamics during the economic crisis periods.

This paper focuses on the particular channels of de-industrialization processes of Azerbaijan considering the Dutch disease syndrome as the theoretical framework. After the emergence of the Dutch disease hypotheses, many resource-rich countries have been the main research object of it. One consequence of the Dutch disease syndrome is a shrinking manufacturing sector compared to the booming sector and the services sector. In order to shed light on this aspect of the Azerbaijan economy, important literature examples were examined and mainly descriptive statistics applied to visualize the economy’s most recent timeline. This research mainly brings back the actuality of the Dutch disease phenomena to Azerbaijan’s economy, depicting and comparing policy responses of the national government.