Testing the export-led growth and growth-driven export hypotheses: The case of Azerbaijan

This study empirically analyses the validity of the Export-Led Growth (ELG) and Growth-Driven Export (GDE) hypotheses, building two respective models in the case of Azerbaijan. The analysis is novel for Azerbaijan since it has yet to be investigated. We apply the Bounds Testing approach to cointegration based on the ARDL model constructed on the quarterly data covering 2001Q3–2018Q4. Further methods, including FMOLS, DOLS, and CCR, are also employed as robustness checks to draw plausible conclusions. The main finding regarding these two hypotheses attests to the existence of the bidirectional (feedback) cointegrating relationship between non-oil economic growth and non-oil real exports while simultaneously controlling for the other factors outlined in the paper. We, therefore, propose our own recommendations for policy-making purposes in line with the empirical findings obtained herein.