An assessment of the Duch Disease risk in the Azerbaijan economy

The Azerbaijani economy is a rapidly growing economy with significant oil and natural gas reserves. However, in recent years, considerable risks have accompanied economic growth. One potential economic threat is the risk of Dutch Disease. This phenomenon leads to a decrease in macroeconomic performance in countries experiencing a natural resource boom. Thus, the dissertation aims to analyze the risk of Dutch Disease within the context of the Azerbaijani economy. For this purpose, annual time series covering the period from 1990 to 2023 were analyzed using econometric tests based on the Fourier approach. Two different models were established to test the hypothesis. The first model examines the impact of Azerbaijan's oil production and global oil prices on economic growth, while the second focuses on natural gas production and prices. The Fourier ADF test indicates that all series are non-stationary at levels but become stationary after first differencing. Therefore, both models were analyzed using the Fourier ARDL Bounds Test. Results show that natural gas production and prices have no significant impact on growth, whereas oil production and prices have a positive influence on it. The analysis suggests that the Dutch Disease hypothesis is not valid for Azerbaijan's economy. Keywords: Dutch disease, Oil, Natural gas, Azerbaijan economy