The effects of oil price changes on economic growth in the case of Azerbaijan

Oil is a crucial part of Azerbaijan economy. Without oil revenues it is impossible to imagine economic growth in Azerbaijan. This study is an attempt to analyze the relationship between oil price changes and economic growth rate. Oil price, GDP, inflation and real effective exchange rate were selected as a variable on the basis of monthly data from 2008 M1 to 2016 M12. All variables were found to be integrated of order I. Then Johanson cointegration test was employed and as a result of that VECM was performed. The result from VECM showed that oil has a positive and significant effect on economic growth of Azerbaijan in the long-term.