Page 55 - Azerbaijan State University of Economics

Nijat Mahmudov: Effects Of Transportation Infrastructure On Economic Growth
In Azerbaijan: ARDl Bounds Testing Approach

Azerbaijan's strategic location at the crossroads of Europe and Asia has made it an
important hub for trade and investment. The country's economy is heavily reliant on
the oil and gas industry, which accounts for a significant portion of its GDP. However,
Azerbaijan has been working to diversify its economy and reduce its reliance on oil
and gas. To achieve this, the country has invested heavily in transportation
infrastructure, including the construction of new highways, airports, and railways.

Improved transportation infrastructure can have a range of positive effects on
economic growth. One of the most significant benefits is the reduction of transaction
costs. A well-developed transportation network enables people and goods to move
quickly and efficiently, reducing the time and money required for business
transactions. This, in turn, makes it easier for businesses to trade with each other and
with customers in other parts of the country and the world. In Azerbaijan, the
construction of the Baku-Tbilisi-Kars railway and the Alat port has improved the
country's connectivity with Turkey, Georgia, and Central Asia, opening up new
opportunities for trade and investment.

Another way in which transportation infrastructure can boost economic growth is by
improving productivity. Better roads and public transport can reduce the time and cost
of commuting, making it easier for workers to access job opportunities. This can
encourage businesses to locate in areas with good transportation links, leading to the
creation of new jobs and economic growth.

Moreover, the development of transportation infrastructure can stimulate new
investment in other sectors of the economy. For example, the construction of new
airports and ports can attract new businesses, such as logistics and transportation
companies, to the area. This can create new jobs and stimulate economic activity in
related industries.

The aim and methodology
This article aims to examine the effects of transportation infrastructure on economic
growth in Azerbaijan. Specifically, the study aims to investigate the relationships
between transportation infrastructure and economic growth in Azerbaijan and to
identify the most significant drivers of economic growth in the country.

The research will use data collected from the Azerbaijan State Statistical Committee,
and other reliable sources. The study will apply the ARDL Bounds Testing approach
to estimate the relationships between transportation infrastructure and economic
growth in Azerbaijan. The empirical analysis will involve testing for the existence of
cointegration between the variables, estimating the long-run parameters of the model,
and testing for short-run dynamic effects.

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