Page 36 - Azerbaijan State University of Economics

Turaj Musayev: The Oil Boom in Azerbaijan and Modeling of Economic Growth in Post-Oil Era

REAL INVEST = * (REAL_GDP − REAL_GDP −1 ) (6)

It was called a guaranteed growth rate by R.Harrod. We can say that this growth rate
guarantees the use of existing production capacities at their maximum rates.

As mentioned in Domar model, aggregate demand in Harrod model is determined
through a multiplicator.

REAL_GDP = = ∗ (REAL_GDP −REAL_GDP −1 ) (7)

Here, REAL_GDP is the value of GDP in period t. If 1 , aggregate demand

will exceed the aggregate supply.

4. INFORMATION BASE OF THE RESEARCH
The study covers the period 2000 to 2017. By evaluating the neo-Keynesian
economic growth models for the Azerbaijan's economy, the dynamic and steady
states of economic growth were determined during this period. All of the indicators
of the study were used in real terms, and the year 2000 was chosen as the base year
for this purpose. The data for the economic indicators in the assessment were used
from the website of the Statistical Committee of the Republic of Azerbaijan
(stat.gov.az) and the website of the National Bank of Azerbaijan (cbar.az).
Econometric assessments were made in the E-views7 software package.

5. EVALUATION OF KEYNESIAN TYPE DOMAR AND HARROD
MODELS IN THE ECONOMY OF AZERBAIJAN
First, it was important to assess the balanced economic growth rates for Domar, and
then Harrod models during the period of the oil boom (2000-2013) when both oil
prices and production were high and in the post-oil era of 2014-2017 when oil prices
declined sharply and oil production was reduced.

In order to evaluate the Domar model, it was necessary to find the parameters of the
savings norm and the marginal productivity of capital. In order to to do that,
econometric evaluation was conducted between 2000 and 2013 for the Azerbaijan
Republic.

The following results were obtained from the implementation of the Domar’s model
in the Eviews7 program for the real indicators for the period covered in the study for
the economy of the Republic of Azerbaijan.

36