Trade openness and economic growth: Evidence from Azerbaijan

Abstract

A review of modern economic literature shows the lack of consensus on the relationship between the trade openness policy and the economic growth of countries. There is also an opinion that the policy of openness in emerging and resource-rich countries presents more opportunities for growth and development. Is this true, and under what conditions does openness lead to growth? Exploring the nature of trade openness and economic growth relationship in resource-rich emerging countries is the purpose of this paper. Therefore, the economy of Azerbaijan, rich in hydrocarbon resources, has been chosen as the object of this study. Next, the VAR model using ADF tests and Johansen’s cointegration was chosen to analyze and evaluate the causal nature of the relationship between openness and growth. Trade openness ratio and GDP per capita growth are model variables. The study covers annual data from 1995 to 2020. It was found that there are no cointegration relationships between variables in the long run. However, there is a unidirectional causal relationship from openness to growth in the short run, and the effect of growth to openness is not statistically significant. The results show that Azerbaijan receives economic benefits from openness by selling oil to the world market. Yet, the short-run nature of such benefits and the lack of feedback from growth to openness suggest specific problems in the diversification and quality of the country’s exports.

Dynamics of the Non-Performing Loans in Azerbaijan: Empirical Analysis

“…Hence, the relationship between non-oil GDP growth and NPL rates in Azerbaijan should be further investigated. Previous research papers analyzing factors impacting non-oil GDP growth in Azerbaijan found a significant positive link between bank credits and non-oil GDP growth (Mukhtarov et al, 2019), a significant positive link between social expenditures of government and non-oil GDP growth, and a significant positive link in long-term between government expenditures and non-oil GDP growth , a significant positive link in the short-term between the trade openness and GDP growth (Seyfullayev, 2022), and no significant link between protectionist policies and non-oil GDP growth (Seyfullayev, 2020). Possible impacts of non-oil GDP and the stated factors impacting the dynamics of non-oil GDP on NPL rates in Azerbaijan should also be researched further.…”

Are Trade Openness Drivers Relevant to Carbon Dioxide Emission? A Study of Emerging Economies

“…International trade plays a pivotal role in fostering extensive market integration and the globalization of trade activities among nations (Bashir et al, 2024;Dsouza et al, 2024;Nasim et al, 2023). This phenomenon exerts a positive impact on economic growth by facilitating the utilization of comparative advantages and the efficient allocation of resources (Sarkar, 2008;Keho, 2017;Ajayi and Araoye 2019;Klishch and Larionov 2022;Seyfullayev, 2022;. Such economic growth, in turn, contributes significantly to the overall improvement of human well-being (Kumari et al, 2023).…”

Intermediating Roles of Institutional Infrastructure in the Trade Openness-Inclusive Growth Nexus: New Empirical Evidence From Nigeria

“…Over the decades, global trade, among other things, has been a key catalyst for economic growth, attracting the attention of academics across various trade-related growth investigations (Arvin et al, 2021;Yussif et al, 2022). Further, the integration of the world and pronounced trade openness has resulted in fundamental transformations in the economic environment, resulting in both possibilities and unforeseen threats to participating country growth (Seyfullayev, 2022). Due to the diversity of economic frameworks, technology, institutional infrastructures, and human capital, trade openness has long been a concern for many nations, particularly developing countries (Zahonogo, 2016).…”

“…Theoretically, trade openness promotes growth by enhancing job creation and domestic value added through its impact on investment, knowledge transfer, and competitiveness. Also, it promotes diversity in the opportunities and competencies to benefit from global trade openness and inclusion (Nguyen & Bui, 2021;Seyfullayev, 2022). Hence, a large corpus of empirical literature has been piloted to substantiate the benefits of international trade among countries and economic agents by investigating the dynamics as well as instituting causal linkages but with divergent outcomes (see Dollar & Kraay, 2004;Grossman & Helpman, 1990;Joshua et al, 2020;Keho, 2017;Ogede, 2014;Ozturk & Acaravci, 2010;Ulaşan, 2015).…”