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Corresponding Author:
Barbara Casu, Bayes Business School, City St George's, University of London, UK

Coauthors:
Aysel Bandad, Bayes Business School, City St George's, University of London, UK
Elisabetta Pellini, Bayes Business School, City St George's, University of London, UK

Economic Growth and Oil Price Shocks in an Oil-abundant Country: The Case of Azerbaijan

June 18, 2026
JEL classification: Q43; C32; E32
Keywords: Oil price shocks; Fiscal transmission; Macroeconomic stability; Vector autoregression; Cointegration; CIS countries

Abstract

The study evaluates the macroeconomic effects of oil price shocks and their transmission mechanisms in Azerbaijan, one of the largest oil exporters in the Commonwealth of Independent States. Vector autoregression modelling, together with cointegration techniques, is applied to monthly data on the Brent oil price and five domestic macroeconomic variables over the period January 2005–July 2021. The results show a significant impact of oil prices on real gross domestic product. Oil price shocks affect the economy mainly through the budget channel, while monetary factors also play a role in explaining short-run economic fluctuations. The findings highlight oil price shocks as a salient external risk with direct implications for macro-financial stability in resource-dependent economies. Impulse response analysis further demonstrates a rapid short-run response of most variables to a one-standard-deviation oil price shock.


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