Coıntegratıon Analysıs of Azerbaıjan's Balance of Payments Usıng the ARDL Methodology

The aim of this study is a comprehensive statistical and econometric assessment of the main components shaping the dynamics of Azerbaijan's balance of payments: foreign trade turnover, foreign direct investment, and oil and gas exports.

Materials and methods. The Autoregressive Distributed Lag (ARDL) methodology was applied based on quarterly data covering the period from Q1 2001 to Q4 2024, with model selection conducted using the Akaike information criterion. The existence of long-run relationships was tested using the Bounds cointegration test, and the model's validity was confirmed through diagnostic procedures (Jarque-Bera, Breusch-Godfrey, Durbin-Watson, CUSUM).

The results obtained show that foreign trade turnover and direct investments have a statistically significant impact on the current account. Although foreign trade has a negative impact in the short term by weakening the balance through an increase in imports, it plays a stabilising role in the medium and long term. Direct investment weakens the balance in the short term through repatriation and import demand, but in the long term, it strengthens production and export potential. Oil and gas exports constitute the primary driver of the current account and have a positive impact in both the short and long term, but the sector's volatility underscores the need for a diversification policy.

In conclusion, from an economic interpretation perspective, the results confirm that policies such as import management, channelling investment flows towards production and exports, diversification of the energy sector, and the development of non-oil sectors are critical to strengthening the sustainability of the balance of payments. The contribution of the study is that, within the ARDL methodology, both short-run and long-run effects have been estimated in the same structure, and the stability and robustness of the model have been demonstrated through diagnostic tests. This approach provides a strong empirical basis for Azerbaijan's macroeconomic stability and the reliability of forecasts.

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