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Javid Seyfullali: Tax Revenue and Economic Growth in Resource-Rich Country:
                                                      Empirical Evidence from Azerbaijan

                    METHOD AND DATA
                    Autoregressive Distributed Lag Bounds Testing (ARDLBT) presented by Pesaran et
                    al. (2001) is used to analyze the relationships between variables. The advantages of
                    the ARDLBT method include the ability to apply to small samples, I(1) and I(0) series
                    simultaneously and to estimate long-run and short-run coefficients (Oteng et al. 2006;
                    Sulaiman et al.,2010).

                    We use 2 models in this paper, the purpose of the Model 1 and 2 are to find out the short-
                    term and long-term impact of government spending on general economic growth and non-
                    oil economic growth, respectively. We will use real non-oil GDP growth as a dependent
                    variable in the second model while using total real GDP growth in the first model.

                    The  3  control  variables  will  be  added  to  the  model.  Capital  formation  and  trade
                    openness  have  been  used  widely  in  previous  research  papers  (Christie  (2012);
                    Mendonca and Caicedo (2014); Asimakopoulos and Karavias (2015); Olaoye et al.
                    (2020)) on this topic as control variables. Additionally, the oil price change variable
                    will be added to the models as oil price changes significantly impact non-oil GDP
                    (Aliyev  and  Nadirov,  2016)  and  obviously  total  GDP  in  Azerbaijan.  The  list  of
                    variables is presented below:

                    Table 1: Information on variables
                        Variable        Symbol        Model                  Definition
                                                     inclusion
                       Real GDP         RGDPG            1       CPI (consumer price index) is used
                         growth                                 to convert nominal GDP to real GDP
                      Real non-oil    RNOGDPG            2       CPI is used to convert nominal non-
                      GDP growth                                    oil GDP to real non-oil GDP
                          Real                                     CPI is used to convert nominal
                      government       RGOVREV          1,2        government expenditure to real
                        revenue                                       government expenditure
                                                                    CPI is used to convert nominal
                      Real capital      CAPINV          1,2       capital investments to real capital
                       investment
                                                                            investments
                                                                 Real total trade is calculated as the
                       Real total    RTOTTRADE          1,2      sum of imports and exports, CPI is
                          trade                                 used to convert nominal total trade to
                                                                           real total trade
                        Oil price      OILPRCG          1,2,     quarterly data of Brent Crude price
                         change                                            (FRED, 2023)
                     Notes: Real government expenditure, real capital investments, and real total trade
                     variables are included to the Model 1 and 2 in the logarithmic forms.
                    Source: Compiled by author


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