Why had the Money Market Approach been irrelevant in explaining inflation in Azerbaijan during the rapid economic growth period?

Fakhri, Hasanov and Khudayar, Hasanli (2011): Why had the Money Market Approach been irrelevant in explaining inflation in Azerbaijan during the rapid economic growth period? Published in: Middle Eastern Finance and Economics No. Issue 10 : pp. 136-145.

Abstract

The study examines whether inflation process can be explained within the framework of the Money Market Approach in the third stage of economic development of Azerbaijan economy covering 2004-2008. By employing dynamic modeling study concludes that the Money Market Approach has not been relevant for explaining Azerbaijani inflation. Because Azerbaijan, a resource rich small open economy in transition processes, has some stylized facts which are important to take into account in the analysis of the inflation. Since the Money Market Approach seems irrelevant one, the paper puts forward application of other alternative explanations for Azerbaijani inflation in the future. In this regard analyzing inflation in the context of resource dependence seems one of the relevant approaches due to high price increases mainly sourced from oil revenues.

• Item Type: MPRA Paper
• Language: English
• Keywords: Inflation rate; Money Market Approach; Transition economy; Resource Abundance; Oil and Non-oil Sectors; Econometric modeling; Azerbaijan
• Subjects: P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P24 - National Income, Product, and Expenditure ; Money ; Inflation; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q33 - Resource Booms; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes

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