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

Keywords: oil boom, post-oil era, economic growth, natural capital, macroeconomic
equilibrium.

JEL classification: F43, O47, C53, Q43

1. INTRODUCTION
Oil production and exports play an important role in economic development as well
as economic growth of oil-producing countries. No one can doubt that the oil prices,
as the energy carriers, affect the individual and global development trends of
countries. However, world oil prices have fallen significantly in recent years, and it
is less likely that oil price will rise to its previous high levels. On the other hand, oil
is a non-renewable resource and in some countries, including in Azerbaijan, the
volume of oil extraction is declining. From this point of view, the study of economic
growth problems for the post-oil era in oil-producing countries increases in
significance. Consequently, developing economic growth models in the context of
Azerbaijan's current economy for the post-oil era is a crucial problem.

It should be noted that the main problem underlying economic growth models is
income distribution. An effective division of income between consumption and
savings creates a balanced and sustainable economic growth. Contemporary
researchers believe that human capital is the main driving force behind economic
growth. Investing in physical capital increases productivity (eg, Keynesian
investment multiplier), whereas the knowledge gained through investment in human
capital provides increased yields through the transfer of retained knowledge.
According to many researchers, the development of human capital determines the
quality of administrative institutions. In countries with high human capital, the
possibility of democratic governance and the level of protection of private property
increases while the corruption declines [Acemoglu D., Johnson S., Robinson J. A.,
Yared P., 2005].

Gorkhmaz Imanov, Yadulla Hasanli (2014) carried out forecasting analysis showing
that the utilization of hydrocarbon resources is subject to normal distribution in
Azerbaijan. It was determined that the peak period of oil extraction is far behind and
will gradually go downwards. All these factors require consideration in studying the
balanced economic growth problem for the post-oil era in Azerbaijan.

It is very important to note that preliminary study of the economic growth problems
in “oil boom” and post-oil era in the case of Azerbaijan was discussed at the
International Conference on Economic Modeling in EcoMod2016
[https://ecomod.net/conferences/ecomod2017?tab= downloads)].

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