The Impact of Real Effective Exchange Rate on the Non-Oil Export: The Case of Azerbaijan
19 Pages Posted: 16 Mar 2011
Date Written: November 1, 2010
The paper investigates the impact of the real exchange rate on non-oil exports in Azerbaijan by applying Vector Error Correction Model. The estimation results suggest that real exchange rate has negative impact on non-oil export performance while non-oil GDP affects positively in the long- and short-run. Error correction term indicates that short-run fluctuation can be adjusted into long-run equilibrium relationship. Based on findings of the study can be concluded that appreciating real exchange rate is one of major factors that impede non-oil export growth. Since promotion of non-oil export is one of the urgent issues of the strategic economic policy of Azerbaijan Republic then findings of this study may be useful for policymakers.
Keywords: Azerbaijani economy, Non-oil export, Real effective exchange rate, Non-oil GDP, Dutch Disease, Vecto
JEL Classification: C32, F31, F41, O24, P28
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