Modeling and Analysis of the Ecomomic Development of Azerbaijan Based on the Production Function

The study aims to identify the economic development potential by modeling and identifying the turning points in the development of the Azerbaijani economy corresponding to the phases in the economic cycle. Overall, the paper presents the results of the analysis of the development of the Azerbaijani economy using production functions (PF). The empirical characteristics of the PF made it possible to periodize the considered time interval i.e. identify areas with different behavior of empirical characteristics. Moreover, it was revealed that these sections are repeated within a certain period. The specifics of economy modeling are determined using the methods of production variables based on the annual data of the State Statistical Committee for 1997–2021. The methodological basis of the study is the economic and mathematical apparatus of the classic Cobb–Douglas production function. The calculations were performed using freely distributed modern software, the statistical environment R: which is one of the most dynamically developing programs in its class. As a result of the study, we identified the chronological boundaries of short-term and medium-term economic cycles in the economy of Azerbaijan, analyzed the patterns of production variables in different periods of the cycle. The article provides the results of modeling the GDP dynamics in Azerbaijan, which are described by production functions with a significantly different set of parameters; identifies important macroeconomic variables; provides an econometric analysis of the models, production variables, and corresponding conclusions.