Protectionism and non-resource economic growth: Evidence from Azerbaijan
-
DOIhttp://dx.doi.org/10.21511/ppm.18(4).2020.11
-
Article InfoVolume 18 2020, Issue #4, pp. 121-129
- Cited by
- 773 Views
-
146 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
In the modern world, many developing countries take protective measures to develop domestic industries and diversify their economies to ensure economic sustainability. This issue is a priority, especially in those countries where economic development is provided mainly through the export of natural resources. This article aims to assess the impact of protectionist measures on the development of non-resource sectors of the economy. The object of the study is the non-oil sector of the Azerbaijani economy, where oil revenues account for over 80% of the country’s total exports. The study covers the 2005–2019 years. Granger Causality test in the VAR environment was used to identify and assess the causal relationship between protectionist measures and the non-oil sector development. It was revealed that such indicators as “customs revenues” and “exchange rate” do not increase non-oil GDP. The study results suggest that increasing the effectiveness of protectionism (in terms of economic growth) requires more reasonable and consistent regulatory measures. Targeting priority sectors and establishing monitoring mechanisms on the results of protectionist measures is also a priority for assessing their feasibility.
- Keywords
-
JEL Classification (Paper profile tab)O24, F63
-
References42
-
Tables3
-
Figures2
-
- Figure 1. Dynamics of Azerbaijan’s quarterly foreign trade surplus and oil exports (2000–2019, in USD million)
- Figure 2. Dynamics of quarterly non-oil export and non-oil import in Azerbaijan (2000–2019, in USD million)
-
- Таble 1. Johansen cointegration rank test (maximum Eigenvalue)
- Table 2. Autocorrelation in the residuals
- Table 3. The results of the Granger causality test
-
- Abboushi, S. (2010). Trade protectionism: reasons and outcomes. Competitiveness Review, 20(5), 384-394.
- Aggarwal, V., & Evenett, S. J. (2013). A Fragmenting Global Economy: A Weakened WTO, MEGA FTAS, and Murky Protectionism (Discussion Paper No. 9781). Centre for Economic Policy Research.
- Alege, P. O., & Osabuohien, E. S. (2015). Trade-Exchange Rate Nexus in Sub-Saharan African Countries: Evidence from Panel Cointegration Analysis. Foreign Trade Review, 50(3), 151-167.
- Aliyev, K., & Mikayilov, C. (2016). Does the Budget Expenditure Composition Matter for Long-Run Economic Growth in a Resource Rich Country? Evidence from Azerbaijan, Academic Journal of Economic Studies, 2(2), 147-168.
- Aliyev, K., Dehning, B., & Nadirov, O. (2016). Modelling the Impact of Fiscal Policy on Non-Oil GDP in a Resource Rich Country: Evidence from Azerbaijan. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 64(6), 1869-1878.
- Barber, C., Gowthaman, B., & Rose, J. (2004). How rich-country protectionism in textiles and clothing trade prevents poverty alleviation (Oxfam Briefing Paper).
- Benita, F. (2019). Trade Openness, Economic Growth and the Global Financial Crisis of 2007–2009 in Latin America. Journal of International Development, 31(5), 411-431.
- Bown, C. P., & Crowley, M. A. (2014). Emerging economies, trade policy, and macroeconomic shocks. Journal of Development Economics, 111, 261-273.
- Carstens, A. (2018). Global market structures and the high price of protectionism. Paper presented at The Federal Reserve Bank of Kansas City’s 42nd Economic Policy Symposium. Jackson Hole, Wyoming.
- Central Bank of Azerbaijan Republic (CBAR). (2020). Macroeconomic Indicators.
- Constantinescu, C., Mattoo, A., & Ruta, M. (2015). The global trade slowdown: Cyclical or structural? (IMF Working Papers No. WP/15/6).
- Costa, R., Dhingra, S., & Machin, S. (2019). Trade and Worker Deskilling (NBER Working Paper No. 25919). NBER Program(s): International Trade and Investment.
- Dehning, B., Aliyev, K., & Nadirov, O. (2016). Modelling ‘productivity’ of budget expenditure items before-and-after the oil boom in a resource rich country: Evidence from Azerbaijan. International Journal of Economic Research, 13(4), 1793-1806.
- Dickey, D., & Fuller, W. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49(4), 1057-1072.
- Egoro, S. A., & Daddy, O. O. (2017). The Impact of International Trade on Economic Growth in Nigeria: An Econometric Analysis. Asian Finance and Banking Review, 1(1), 28-47.
- Gallagher, K. P. (2012). The Myth of Financial Protectionism: The New (and Old) Economics of Capital (Working Paper Series). Political Economy Research Institute.
- Granger, C. W. J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, 37(3), 424-438.
- Granger, C. W. J., & Newbold, P. (1986). Forecasting economic time series (2nd ed.). New York: Academic Press.
- Grundke, R., & Moser, C. (2019). Hidden protectionism? Evidence from non-tariff barriers to trade in the United States. Journal of International Economics, 117, 143-157.
- Hasanov, F., Mammadov, F., & Al-Musehel, N. (2018). The Effects of Fiscal Policy on Non-Oil Economic Growth. Economies, 6(2), 27.
- Humbatova, S. I., Garayev, A. I., Tanriverdiev, S. M., & Hajiyev, N. G. (2019). Analysis of the oil, price and currency factor of economic growth in Azerbaijan. Entrepreneurship and Sustainability Issues, 6(3), 1335-1353.
- IRC. (2016). Understanding the weakness in global trade - What is the new normal? (ECB Occasional Paper, No. 178). European Central Bank (ECB), IRC Trade Task Force.
- Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12(2-3), 231-254.
- Keho, Y. (2017). The impact of trade openness on economic growth: The case of Cote d’Ivoire. Cogent Economics & Finance, 5(14), 1-14.
- Kinzius, L., Sandkamp, A., & Yalcin, E. (2019). Trade protection and the role of non-tariff barriers. Review of World Economics, 155, 603-643.
- Lewis, L. T., & Monarch, R. (2016). Causes of the global trade slowdown (IFDP Working Papers, No. 2016-11-10). Board of Governors of the Federal Reserve System.
- Lütkepohl, H. (2005). New introduction to multiple time series analysis. Berlin: Springer Berlin Heidelberg.
- Mayda, A. M., & Rodrik, D. (2001). Why are some people (and countries) more protectionist than others? (NBER Working Paper No. 8461). National Bureau of Economic Research.
- Mukhtarov, S., Aliyev, S., & Zeynalov, J., (2020). The Effect of Oil Prices on Macroeconomic Variables: Evidence from Azerbaijan. International Journal of Energy Economics and Policy, 10(1), 72-80.
- Mukhtarov, S., Humbatova, S., & Seyfullayev, I. (2019). The impact of bank credits on non-oil GDP: evidence from Azerbaijan. Banks and Bank Systems, 14(2), 120-127.
- Ng, F., & Yeats, A. (1999). Good Governance and Trade Policy. Are They the Keys to Africa’s Global Integration and Growth? (Policy Research Working Paper No. 2038). The World Bank, Washington D.C.
- O’Rourke, K. H., & Taylor, A. M. (2006). Democracy and Protectionism (NBER Working Paper No. 12250).
- Ojo, A. T., & Alege, P. O. (2014). Exchange Rate Fluctuations and Macroeconomic Performance in Sub-Saharan Africa: A Dynamic Panel Cointegration Analysis. Asian Economic and Social Society, 4(11), 1573-1591.
- Osabuohien, E. S., Beecroft, I., & Efobi, U. R. (2018). Global trade and trade protection in a globalized world. Transnational Corporations Review, 10(1), 43-52.
- Panagariya, A. (2004). Miracles and Debacles: In Defence of Trade Openness. The World Economy, 27(8), 1149-1171.
- Park, S. C. (2018). U.S. Protectionism and Trade Imbalance between the U.S. and Northeast Asian Countries. International Organisations Research Journal, 13(2), 76-100.
- Phillips, P. B., & Perron, P. (1988). Testing for unit roots in time series regression. Biometrika, 75(2), 335-346.
- Reinert, E. S. (2011). How Rich Countries Got Rich and Why Poor Countries Stay Poor.
- Seipati, M., & Itumeleng, P. M. (2014). The Impact of International Trade on Economic Growth in South Africa: An Econometrics Analysis. Mediterranean Journal of Social Sciences, 5(14), 60-66.
- State Statistical Committee of the Republic of Azerbaijan (SSCRA). (2020a). Labour market.
- State Statistical Committee of the Republic of Azerbaijan (SSCRA). (2020b). System of national accounts and balance of payments.
- Zaman, Q., Donghui, Z., Yasin, G., Zaman, S., & Muhammad, I. (2018). Trade Openness and FDI Inflows: A Comparative Study of Asian Countries. European Online Journal of Natural and Social Science, 7(2), 386-396.