Acta Univ. Agric. Silvic. Mendelianae Brun. 2019, 67, 799-810
Published online 2019-06-27

Modelling Elasticity of Non‑Oil Tax Revenues to Oil Price Changes: is There U‑Shaped Association? Evidence from Azerbaijan

Khatai Aliyev1,2,5, Altay Ismayilov3,6, Ilkin Gasimov1,4,5

1UNEC Empirical Researches Center, Azerbaijan State University of Economics (UNEC), Baku, Azerbaijan
2Department of World Economy, Baku Engineering University, Khirdalan, Azerbaijan
3International School of Economics, Azerbaijan State University of Economics (UNEC), Baku, Azerbaijan
4Institute for Scientific Research on Economic Reforms, Ministry of Economy of the Republic of Azerbaijan, Baku, Azerbaijan
5Department of Public Policy Modelling, ASERC, Baku, Azerbaijan
6Knowledge Economy UNEC Researches Center, Azerbaijan State University of Economics (UNEC), Baku, Azerbaijan

Received June 7, 2018
Accepted May 17, 2019

Oil price changes has a great influence on the behaviour of firms in oil exporting countries which displays itself in amount of non‑oil tax receipts of the state budget. Employing FMOLS, DOLS, and CCR cointegration methods for 2001Q1–2015Q4, the study aims to analyse how oil price changes affects non‑oil tax revenues in Azerbaijan. Empirical results altogether provide strong scientific evidence that there is U‑shaped causality from oil price changes to total non‑oil tax revenues , corporate income tax receipts and labour income tax payments , and inverse U‑shaped to non‑oil VAT revenues of the state budget. Results show that firms face with the trade‑off between “produce‑and‑sell” and “import‑and‑sell” as oil price rises. In case of higher price than the threshold level, companies prefer the latter choice. Research findings are highly useful for the public policy decision‑makers in resource rich economies.


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