How to Deal with Azerbaijan's Oil Boom? Policy Strategies in a Resource-Rich Transition Economy

43 Pages Posted: 15 Feb 2006

See all articles by Christoph B. Rosenberg

Christoph B. Rosenberg

International Monetary Fund (IMF) - European Department

Tapio Saavalainen

International Monetary Fund (IMF)

Date Written: January 1998

Abstract

The petroleum-rich former Soviet republics around the Caspian Sea face the dual challenge of managing the transition to a market economy and a booming resource sector. This paper examines this challenge with particular reference to Azerbaijan. The standard "Dutch disease" model is modified to capture the special conditions of transition economies, with specific attention to the pattern of real exchange rate movement. "Transition factors" are found to add to the speed of real appreciation. Non-oil sectors may suffer, but less through the real appreciation than through transition-specific structural problems. The paper describes a medium-term policy strategy for Azerbaijan, relating its prospects to the experience in the 1970s of Ecuador, Indonesia, and Nigeria. The adverse effects of the Dutch disease may be avoided if Azerbaijan pursues policies to promote savings and open trade, and strengthens the supply side through structural policies.

Keywords: Azerbaijan, Dutch disease, transition, oil

JEL Classification: F43, O53, Q33, Q43

Suggested Citation

Rosenberg, Christoph and Saavalainen, Tapio, How to Deal with Azerbaijan's Oil Boom? Policy Strategies in a Resource-Rich Transition Economy (January 1998). IMF Working Paper No. 98/6, Available at SSRN: https://ssrn.com/abstract=882220

Christoph Rosenberg (Contact Author)

International Monetary Fund (IMF) - European Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Tapio Saavalainen

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
321
Abstract Views
1,551
rank
129,641
PlumX Metrics