Economic analysis of Azerbaijan-Turkey relations: Problems, solutions and policy recommendations

The relations between Azerbaijan and Turkey, which have deep historical and cultural ties, have followed an increasing and deepening path and have become a developing regional power. In the study, the data covering the period of 2010-2020 reflecting the Azerbaijan-Turkey economy were used and econometric analyzes were made. In order to investigate the validity of the variables affecting the economic growth of the two countries, first of all, the degrees of stationarity of the variables in the established model were determined by using the Levin-Lin-Chu, Fisher ADF and Hadri panel unit root tests. In the next stage, the existence of long-term relationships between the variables was determined by Kao Cointegration test and Pedroni Cointegration test. In the last stage, the long-term relationships were estimated using the Fully Corrected Least Squares Method (FMOLS). Panel unit root tests and panel cointegration estimations were made and it was concluded that there was a significant and positive relationship between economic growth and exports and financial investment inflows, and it was concluded that there was a significant and negative relationship between economic growth and financial investment outflows and imports. According to the test results obtained, it is necessary to increase the investments made in Azerbaijan and Turkey by increasing exports and imports, and to balance the outflow of capital. The two countries should mutually support their economic investments and trade-based economic policies and joint steps should be taken.