Page 132 - Azerbaijan State University of Economics

Yadulla Hasanli, Gunay Rahimli, Fuad Quliyev, Mattia Ferrari: Evaluation of Sectoral
Foreign Trade Elasticities of Azerbaijan

In the study, the CET function was also estimated for the service sector, and the
results were as follows:

)
Y = . 0 96 . 0 ( 29E − . 0 29 + . 0 71D − . 0 29 − . 0 71
j
j
j

R2=0.99, DW=1.99
The actual and fitted values of total output in the service sector, along with the
dynamics of the difference between them, are presented in Graph 6.

Based on the estimated model parameters, the elasticity between service sector
exports and domestically produced services sold in the domestic market is calculated
as follows:
1
= = 0.41
1 + 0.29

The elasticity of substitution for the allocation of service sector production between
domestic and foreign markets is 0.41, indicating that a 1% increase in the price of
service sector products in the foreign market leads to a 0.41% increase in the ratio of
domestic to export market volumes.

350
315
280
245
210
175
140

105
70
35
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
-35
actual values fitted values

Figure 6. Actual and fitted values of total output in the service sector

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