# How Oil Price Changes Affect Inflation in an Oil-Exporting Country: Evidence from Azerbaijan

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## Abstract

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## 1. Introduction

## 2. Literature Review

## 3. Materials and Methods

## 4. Results and Interpretations

#### 4.1. Results from ARDLBT

#### 4.2. Results from FMOLS and CCR

#### 4.3. Simulation

## 5. Conclusions and Discussion

## Author Contributions

## Funding

## Institutional Review Board Statement

## Informed Consent Statement

## Data Availability Statement

## Conflicts of Interest

## References

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Variable | The ADF Test | The PP Test | |||||
---|---|---|---|---|---|---|---|

Level | k | First Difference | k | Level | First Difference | ||

Intercept | CPI_Y | −2.88 * | 0 | −5.53 *** | 1 | −2.85 * | −9.15 *** |

Oprc | −1.74 | 0 | −4.35 *** | 0 | −1.72 | −4.30 *** | |

Money | 0.41 | 0 | −4.36 *** | 0 | 0.41 | −4.36 *** | |

Trend and intercept | CPI_Y | −2.93 | 0 | −5.66 *** | 1 | −2.92 | −11.67 *** |

Oprc | −1.74 | 0 | −4.33 ** | 0 | −1.82 | −4.32 ** | |

Money | −2.05 | 0 | −4.52 *** | 0 | −2.05 | −4.52 *** |

k | AIC | SBC | ${\mathit{\chi}}_{\mathit{S}\mathit{C}}^{2}\left(2\right)$ |
---|---|---|---|

0 | 4.818 | 5.358 | 4.316 [0.0413] |

1 | 4.454 | 5.194 | 4.592 [0.0617] |

2 | 1.631 | 2.573 | 17471 [0.0053] |

The Sample F-Statistic | Significance Level | Pesaran et al. (2001) [45] Critical Values | Narayan (2005) [46] Critical Values | ||
---|---|---|---|---|---|

Lower Bound | Upper Bound | Lower Bound | Upper Bound | ||

${F}_{w}=15.26$ | 1% | 3.65 | 4.66 | 5.20 | 6.64 |

5% | 2.79 | 3.67 | 3.71 | 4.88 | |

10% | 2.37 | 3.20 | 3.09 | 4.12 |

Variables | Coefficients | Std. Error. | Prob. |
---|---|---|---|

Panel A: The estimated final ARDL Specification | |||

$c$ | −168.2 | 32.36 | 0.0002 |

$CPI\_{Y}_{t-1}$ | −1.077 | 0.095 | 0.0000 |

$\mathrm{log}{\left(Oprc\right)}_{t-1}$ | 34.74 | 7.456 | 0.0004 |

$\mathrm{log}{\left(Money\right)}_{t-1}$ | 26.88 | 5.038 | 0.0001 |

$\mathrm{log}{\left(\mathrm{Oprc}\right)}_{t-1}\ast \mathrm{log}{\left(Money\right)}_{t-1}$ | −4.928 | 0.984 | 0.0002 |

$\Delta \mathrm{log}{\left(Money\right)}_{t-1}$ | 9.270 | 3.744 | 0.0278 |

$\Delta \mathrm{log}{\left(Oprc\right)}_{t-1}\ast \Delta \mathrm{log}{\left(Money\right)}_{t-1}$ | −24.26 | 11.79 | 0.0603 |

$D1$ | −11.29 | 3.099 | 0.0030 |

$D2$ | 26.47 | 7.924 | 0.0053 |

$t$ | −1.125 | 0.311 | 0.0031 |

Panel B: Statistics and Residuals Diagnostics tests results | |||

$\sigma =1.895$, ${\chi}_{SC}^{2}\left(2\right)=0.607\left[0.5623\right]$, ${\chi}_{ARCH}^{2}\left(2\right)=4.123\left[0.0336\right]$, ${\chi}_{BPG}^{2}=1.344\left[0.3044\right]$, $J{B}_{N}=1.21\left[0.5467\right]$, ${F}_{FF}=1.74\left[0.1063\right]$ |

Engle–Granger Test | Phillips–Ouliaris Test | |||
---|---|---|---|---|

Tau-Statistic | Z-Statistic | Tau-Statistic | Z-Statistic | |

FMOLS | −5.170 ** | −25.07 *** | −5.360 ** | −23.04 ** |

CCR | −5.170 ** | −25.07 *** | −5.360 ** | −23.04 ** |

Variables | Coefficients | Std. Error. | Prob. |
---|---|---|---|

Panel A: Results from FMOLS | |||

$C$ | −88.40 | 22.72 | 0.0011 |

$\mathrm{log}{\left(Oprc\right)}_{t}$ | 19.60 | 6.889 | 0.0108 |

$\mathrm{log}{\left(Money\right)}_{t}$ | 11.55 | 3.124 | 0.0017 |

$\mathrm{log}{\left(\mathrm{Oprc}\right)}_{t}\ast \mathrm{log}{\left(Money\right)}_{t}$ | −2.128 | 0.849 | 0.0220 |

$D1$ | −14.60 | 2.745 | 0.0000 |

$D2$ | 7.928 | 3.145 | 0.0214 |

Panel B: Results from CCR | |||

$C$ | −91.79 | 26.85 | 0.0031 |

$\mathrm{log}{\left(Oprc\right)}_{t}$ | 20.70 | 8.352 | 0.0233 |

$\mathrm{log}{\left(Money\right)}_{t}$ | 11.94 | 3.724 | 0.0049 |

$\mathrm{log}{\left(\mathrm{Oprc}\right)}_{t}\ast \mathrm{log}{\left(Money\right)}_{t}$ | −2.255 | 1.058 | 0.0471 |

$D1$ | −14.54 | 3.271 | 0.0003 |

$D2$ | 7.758 | 3.795 | 0.0559 |

Broad Money (mln AZN) | $\frac{\Delta \mathit{C}\mathit{P}{\mathit{I}}_{\mathit{y}\mathit{e}\mathit{a}\mathit{r}}}{\Delta \mathit{o}\mathit{p}\mathit{r}\mathit{c}\mathit{\%}}$ | Oil Price (USD) | $\frac{\Delta \mathit{C}\mathit{P}{\mathit{I}}_{\mathit{y}\mathit{e}\mathit{a}\mathit{r}}}{\Delta \mathit{M}\mathit{o}\mathit{n}\mathit{e}\mathit{y}\mathit{\%}}$ |
---|---|---|---|

Panel A: Simulation results from ARDLBT | |||

4000 | −0.0569 | 20 | 0.1125 |

6000 | −0.0755 | 30 | 0.0940 |

8000 | −0.0887 | 40 | 0.0808 |

10,000 | −0.0989 | 50 | 0.0706 |

12,000 | −0.1072 | 60 | 0.0622 |

14,000 | −0.1143 | 70 | 0.0552 |

16,000 | −0.1204 | 80 | 0.0491 |

18,000 | −0.1258 | 90 | 0.0437 |

20,000 | −0.1306 | 100 | 0.0389 |

Panel B: Simulation results from FMOLS | |||

4000 | 0.0194 | 20 | 0.0516 |

6000 | 0.0108 | 30 | 0.0430 |

8000 | 0.0047 | 40 | 0.0369 |

10000 | −0.0001 | 50 | 0.0321 |

12,000 | −0.0040 | 60 | 0.0282 |

14,000 | −0.0073 | 70 | 0.0249 |

16,000 | −0.0101 | 80 | 0.0221 |

18,000 | −0.0126 | 90 | 0.0196 |

20000 | −0.0148 | 100 | 0.0174 |

Panel C: Simulation results from CCR | |||

4000 | 0.0200 | 20 | 0.0518 |

6000 | 0.0108 | 30 | 0.0427 |

8000 | 0.0043 | 40 | 0.0362 |

10,000 | −0.0007 | 50 | 0.0312 |

12,000 | −0.0048 | 60 | 0.0270 |

14,000 | −0.0083 | 70 | 0.0236 |

16,000 | −0.0113 | 80 | 0.0206 |

18,000 | −0.0139 | 90 | 0.0179 |

20,000 | −0.0163 | 100 | 0.0155 |

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## Share and Cite

**MDPI and ACS Style**

Aliyev, K.; Humbatova, S.; Gadim-Oglu, N.H. How Oil Price Changes Affect Inflation in an Oil-Exporting Country: Evidence from Azerbaijan. *Sustainability* **2023**, *15*, 5846.
https://doi.org/10.3390/su15075846

**AMA Style**

Aliyev K, Humbatova S, Gadim-Oglu NH. How Oil Price Changes Affect Inflation in an Oil-Exporting Country: Evidence from Azerbaijan. *Sustainability*. 2023; 15(7):5846.
https://doi.org/10.3390/su15075846

**Chicago/Turabian Style**

Aliyev, Khatai, Sugra Humbatova, and Natig Hajiyev Gadim-Oglu. 2023. "How Oil Price Changes Affect Inflation in an Oil-Exporting Country: Evidence from Azerbaijan" *Sustainability* 15, no. 7: 5846.
https://doi.org/10.3390/su15075846