OIL PRICE DROP IN 2014-2015 AND ITS IMPACT ON AZERBAIJANI ECONOMY

SUMMARY Many people (at least, in Azerbaijan) think that Azerbaijan’s economy and fiscal issues are strongly dependent on oil prices in the world market. However, there is very meager empirical analysis of oil price shocks on the national economy. In this paper, the interactions of government revenues, gross domestic product, oil price and exchange rate of Azerbaijani manta are investigated through VAR modelling. As I was interested only in recent oil price fall, the research period covers 2013:M1 – 2015:M6. The prediction based on the model indicates that fiscal revenues and gross domestic product will continues to fall in the second half of 2015 due to supposed decline in oil price. The local currency also will continue to lose its value till the end of the year