City Research Online

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.

Publication Type:	Article
Additional Information:	Copyright: The Authors. Distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (CC BY-NC 4.0).
Publisher Keywords:	Oil price shocks; Fiscal transmission; Macroeconomic stability; Vector autoregression; Cointegration; CIS countries
Subjects:	H Social Sciences > HB Economic Theory
Departments:	Bayes Business School Bayes Business School > Faculty of Finance
SWORD Depositor:	Symplectic Administrator

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