Post-Oil Period in Azerbaijan: Economic Transformations, Anti-Inflation Policy and Innovations Management

Abstract

Azerbaijan's economy is traditionally characterized by a high dependence on the oil industry. Thus, the revenues from producing and selling oil and oil products provided economic growth and financing for most consumer needs. However, the transition from the oil boom to the gradual decline of the oil industry has caused quite serious economic shocks and identified the need for significant structural transformations in the national economy. The article aims to study the potential of innovative development of Azerbaijan's economy in the post-oil period and to determine the priorities of the state's anti-inflationary policy. To test the hypothesis of the need to change the directions of economic regulation and anti-inflationary policy, a dynamic and structural analysis of key indicators of Azerbaijan's economic development (production, employment, exports, inflation, the balance of payments, government spending, etc.) during the oil boom and post-oil period was conducted. The structural transformations in the economy of Azerbaijan that have taken place over the past 20 years have been identified, which made it possible to put forward a hypothesis about the impact of world oil demand on the main parameters of the country's national economy. Regression analysis by the Newey West method (time-series data) revealed the specifics of the relationship between key indicators of oil industry development (oil production and sales, oil prices), inflation (consumer prices, exchange rate), production (structure and value-added of industry, investment, etc.), innovative development (expenditure on research and development, production and foreign trade of high-tech goods and services) and the social sector (government spending, employment, education) in two time periods: the oil boom (2005–2014) and the post-oil period (after 2014). It was proved that the transition from the oil boom to the post-oil period is associated with a change like cause-and-effect relationships between indicators of the development of the oil industry and several indicators of economic, innovative, and social development of Azerbaijan. Based on the identified changes in the specifics of causation, the directions of changing the priorities of state regulation of the economy in the context of overcoming inflation and ensuring the transition to an innovation-driven economy are substantiated.