Page 31 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.79, # 2, 2022, pp. 19-36

Also, based on the results of the study, it was determined that the interest burden,
which gives the maximum level of profits on banking sector in the lockdown period
was 2.9%, and in the non-lockdown period was 2.0%. (Table 4).

Table 4. Summary findings on the levels of interest burden (for the case of
Azerbaijan)

Objects of interest The levels of interest burden

Lockdown Non-
lockdown
Maximum level of Profits of banking 2.9% 2.0%
sector
Maximum level of Tax revenues 1.48% 1.63%
Minimum level of Tax revenues 1.87% 2.16%
Source: Summary table of results compiled by the author.

Determining the level of the interest burden that maximizes both bank profitability
and tax revenues is an important in ensuring the harmony between monetary and fiscal
policy. The smaller the differences between these interest burden levels would provide
the more harmonious the development of economic policies.

CONCLUSIONS
In this study, the effects of the interest burden on the amount of bank profits and tax
revenues were studied on the basis of polynomial regression. If we look at the figures,
the average level of the interest burden in the Republic of Azerbaijan averaged 1.8%
in 2018-2021. Determining the general pattern on a long-term basis and conducting
additional analyses would further improve the results.

As a result of the study, it was found that the interest burdens maximizing profitability of
the banking sector and tax revenues are different. In addition, the level of interest burdens
maximizing the economic categories (such as bank profits and tax revenues) was assessed
separately for lockdown and non-lockdown periods. Thus, the interest rate that maximizes
tax revenues during the non-lockdown period was estimated at 1.48%, and 1.63% during
the lockdown period, respectively. It was also found that the interest burden, maximizing
tax revenue during the non-lockdown period, was 2.16%, and 1.87% during the lockdown
period, respectively. According to the results of the model, the interest burden
maximizing profit of banking system in the lockdown period is 2.9%, but in the non-
lockdown period is 2.0%. In order to ensure fiscal and monetary harmonization, it is
important to consider the difference between these interest burdens as far as possible
within the framework of optimality.

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