Prudent Management of Oil Revenues: Impacts of Government Capital Expenditures in Azerbaijan

20 Pages Posted: 18 Jul 2017

See all articles by Sarvar Gurbanov

Sarvar Gurbanov

ADA University, SPIA, School of Public and International Affairs

Jeffrey B. Nugent

University of Southern California - Department of Economics

Jeyhun Mikayilov

Azerbaijan State University of Economics (UNEC)

Date Written: July 11, 2017

Abstract

Azerbaijan is an oil rich country facing three severe problems at the same time: economic volatility, the need to promote industrial diversification and the recent sharp fall in oil prices which many expect to continue. It is thus a highly appropriate time to conduct a study for this resource-rich country that would relate its insufficient and ineffective industrial diversification to the effectiveness of its efforts to overcome these problems, including the encouragement of FDI, the creation of its State Oil Fund and the establishment of a fiscal rule. To this end, in this study we pull together empirical evidence concerning the allocation of oil windfall gains, the quality of the country’s budgetary institutions and its State Oil Fund and their effects on Azerbaijan’s budgetary outcomes. But, more uniquely, we develop and apply some models to capture the long terms effects of oil prices and fiscal management on industrial diversification, where we find the efforts to date to have fallen far short of what is needed. Our analysis leads us to suggestions for much needed improvements in policy.

Keywords: Oil Windfall Gains, Government Capital Expenditures, Non-Oil Diversification, Industrial Policy

JEL Classification: Q01, Q32, Q43, H54, L52, O23, O25, O53

Suggested Citation

Gurbanov, Sarvar and Nugent, Jeffrey B. and Mikayilov, Jeyhun, Prudent Management of Oil Revenues: Impacts of Government Capital Expenditures in Azerbaijan (July 11, 2017). Available at SSRN: https://ssrn.com/abstract=3000379 or http://dx.doi.org/10.2139/ssrn.3000379

Sarvar Gurbanov (Contact Author)

ADA University, SPIA, School of Public and International Affairs ( email )

11 Ahmedbay Aghaoglu
Baki, AZ 1008
Baku, AZ 1008
Azerbaijan

Jeffrey B. Nugent

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States
510-740-2107 (Phone)
510-740-8543 (Fax)

Jeyhun Mikayilov

Azerbaijan State University of Economics (UNEC) ( email )

Istiglaliyyat street 6
Baku, AZ Az1001
Azerbaijan

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