Page 40 - Azerbaijan State University of Economics

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

For the post-oil period, more precisely for the most recent 2 years, on average the
marginal propensity to consume ( ) and accelerator (∝) values went down to 0.1
and 1.8, respectively. The rate of growth can be determined as follows [Yadulla
Həsənli, 2003]:

= = = 0.037037 (12)
_ − _ −1
_ −1 ∝−

Thus, during the transition to a post-oil era, in accordance with Harrod model
“guaranteed rate of growth in Azerbaijan must be equal to 3.7%.

6. DISCUSSION OF OUTCOMES
The rate of short-term balanced economic growth was determined for oil boom and
post-oil era based on the evaluation of the equality of aggregate demand and supply.
In accordance with both the Domar and Harrod models, the rate of balanced
economic growth during the post-oil era was lower than in the oil boom period. As
shown in Domar model, the rate of dynamic balanced economic growth was 6.5
during the oil boom, and it was 2% during the post-oil era. According to the Harrod
model, the guaranteed growth rates were 11.7 and 3.7 respectively in the two eras.
The GDP growth rate between 2000 and 2013 was 12%, and it was 0.9% between
2014 and 2017. As we see, GDP growth rate was higher than the rate of guaranteed
balanced growth during the oil boom, but it was lower in the post-oil era. A higher
rate of balanced growth of Domar model as compared to the guaranteed growth rate
was a result of the the difference between the value of productivity of capital and the
accelerator.

In accordance with Domar model, the balanced growth rate is σ* , but in

accordance with the Harrod model guaranteed growth rate is
−

∆ _ ∆ _
σ = lim ≈
∆ →0 ∆ ∆
or
1
ΔK = ∆ _ ,
t
t
σ
1
_ = ( - −1 ) = ΔK = ∆ _ .

t
t

σ

If we compare this equality with the equality in Harrod model, = *

1
( _ − _ −1 ), we have = . In other words, the value of

σ
productivity of capital is opposite of the accelerator. The growth rate of the Domar
model.
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