Citation:

Nesibov Kenan "Econometric Analysis of Trade Turnover between Azerbaijan and Türkiye" International Research Journal of Economics and Management Studies, Vol. 5, No. 10, pp. 16-24, 2026. Crossref. https://doi.org/10.56472/25835238/IRJEMS-V5I10P103

Abstract:

This study conducts an econometric analysis of bilateral trade turnover between Azerbaijan and Türkiye over the 2005–2024 period, focusing on the role of each country’s gross domestic product (GDP) as a determinant of trade flows. Using annual data and an ordinary least squares (OLS) static regression model, the analysis finds that Türkiye’s GDP exerts a statistically significant positive effect on trade turnover, while Azerbaijan’s GDP shows no significant influence. The model explains approximately 49% of the variation in trade (R² = 0.488). Diagnostic testing reveals severe positive first-order autocorrelation (Durbin–Watson = 0.513), indicating omitted dynamics and calling into question the reliability of standard errors under the static specification. However, CUSUM and CUSUMSQ tests confirm parameter stability, and White’s test rejects heteroskedasticity. A residual-based narrative identifies a structural shift around 2018, transitioning from a prolonged period of under-trading to over-trading, driven by strategic energy infrastructure projects (e.g., TANAP, STAR refinery) and deeper geopolitical alignment. The paper concludes that while Türkiye’s economic size is a key driver of bilateral trade, the presence of autocorrelation necessitates a dynamic modelling framework, such as an autoregressive distributed lag (ARDL) model, for robust inference. These findings contribute to the limited quantitative literature on Azerbaijan–Türkiye trade and underscore the need for more sophisticated time-series approaches to capture evolving bilateral economic relations.

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Keywords:

Econometric Analysis, Trade Turnover, Azerbaijan–Türkiye Trade Relations, Bilateral Trade, International Trade, Trade Volume, Economic Cooperation, Time Series Analysis, Trade Balance, Economic Growth.