Page 109 - Azerbaijan State University of Economics

82. Ibrahim Niftiye: Descriptive Analysis of Employment in Azerbaijan: Possibilities of the Dutch Disease

83.
84.
Lastly, making an accurate judgment of the spending effect of Dutch disease in the
case of Azerbaijan is relatively challenging because of the multiple reasons behind
the indicated dynamics. However, the original theory and the established body of the
literature shed light on specific paths of the existence of the spending effect.
Subsequently, a more genuine relationship can be derived from the correlation
matrix that relays on the variables that are very commonly used in Dutch disease
research. From Table 3, a strong positive relationship can be observed between
REER and spending of the government and expenditure of SOFAZ, which can be in
line with spending effect (.83 and .93 respectively). The other results include the
positive and significant connection between oil prices and oil GDP (.67), a positive
and meaningful relationship between non-oil GDP and share of SOFAZ in the state
budget (.87). As crude oil exports increased, the share from SOFAZ also made
progress having more shares in the state budget (.81). Natural gas exports had a
positive and vital impact on the non-oil GDP and the percentage share of SOFAZ
handovers in the state budget (.93). Non-oil GDP widely includes services, so the
revenue sourced from it also was spent inside the government expenditures.
Table 3:Correlation Matrix (Pearson’s R) for the selected variables, time range:2003-2018.

1 2 3 4 5 6 7 8 9 10 11
1 REER 1
(2010=100)
**
2 Oil Price .83 1
**
**
3 Oil GDP .63 .67 1
**
4 Non-oil GDP .44 .27 .80 1
5 Crude Oil .76 .60 .79 .57 1
**
*
**
*
Exports
6 Natural Gas * **
Exports .17 0 .65 .93 .01 1
7 Government .83 .60 .65 .69 .70 .56 1
**
**
**
*
**
*
Expenditure
8 Expenditures of .93 .79 .73 .62 .75 .48 .93 1
**
**
*
**
**
**
SOFAZ
9 Revenue of .80 .70 .78 .62 .76 .47 .78 .87 1
**
**
**
**
**
**
*
SOFAZ
10 Transfers from .83 .65 .82 .75 .81 .66 .90 .94 .89 1
**
**
**
**
*
**
**
**
**
SOFAZ
11 SOFAZ
transfers as % .72 .60 .84 .87 .66 .84 * .87 .88 .77 .94 1
**
**
**
*
**
**
**
**
**
of the state *
budget
** Correlation is significant at the 0.01 level (2-tailed).
* Correlation is significant at the 0.05 level (2 tailed).

Source: SSCRA, CBAR, Reports of SOFAZ, IndexMundi, author’s calculations.
Note: Observation number is 16 for all variables except Natural Gas Exports (N=13)

109