Akademik Məlumat İdarəetmə Sistemi
37th International Scientific Conference on Economic and Social Development - Socio Economic Problems of Sustainable Development, Baku, Azerbaijan, 14 - 15 February 2019, pp.1063-1072
The intensity of economic and political changes in the globalized economy requires significant changes in the exchange rate policies of the developing countries. This has led the determination of tranmission channel from exchange rate volatility to the economy to be much more complex for researchers. Different approaches have been put forward explaining the transmission channel in various countries. The short and long-run, direct and indirect channels of the transmission have been studied in the existing literature. The study examines and defines the tranmission channel from exchange rate volatility to the share of agriculture in GDP of Azerbaijan Republic. Key research variables of the study have been chosen among the main macroeconomic variables of the country. Quarterly data from 2007 to 2018 is taken for the econometric analysis. The paper uses a cointegrated VAR model, VECM model for Azerbaijan in order to study the response of the share of agriculture in GDP to non-oil real effective exchange rates in Azerbaijan. Empirical analysis shows that, for Azerbaijan there is a short-run statistical significant relationship between the non-oil real effective exchange rate and agriculture share in GDP getting its basis from the increasing trade in the country in a short-term. Besides, there have been found a long run relationship running from Imports; Inflation and GDP to share of Agriculture in GDP; and from Imports; Inflation and GDP to non-oil real effective exchange rate in Azerbaijan as well. In conclusion, decreases in trade (exports and imports) are transmitted to higher non-oil real effective exchange rate that also affects the share of agriculture in GDP negatively in a short-run and they relate with each other in a long-run as well.