Acta Univ. Agric. Silvic. Mendelianae Brun. 2019, 67(3), 799-810 | DOI: 10.11118/actaun201967030799

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

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.

Keywords: oil price changes, firm behaviour, non oil sector, tax revenues, threshold level, produce and sell, import and sell, natural resources

Received: June 7, 2018; Accepted: May 17, 2019; Published: June 27, 2019  Show citation

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Aliyev, K., Ismayilov, A., & Gasimov, I. (2019). Modelling Elasticity of Non-Oil Tax Revenues to Oil Price Changes: is There U-Shaped Association? Evidence from Azerbaijan. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 67(3), 799-810. doi: 10.11118/actaun201967030799
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