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Ministry of Economy of the Republic of Azerbaijan

INSTITUTE for SCIENTIFIC RESEARCH on ECONOMIC REFORMS

 

ANALYTIC TOOL: «AZMOD» 

 

The main objective of socio-economic policy sucessfully continued by our distinguished president Mr. Ilham Aliyev which stems from the strategy of our great national leader Heydar Aliyev, is the achievement of a diversified and sustainable socio-economic development through the development of non-oil sector using and managing oil revenues effectively in Azerbaijan. The studies on the experience of developed countries shows that the successful implementation of the said policy in line with other factors first requires in-depth and science-based analysis of the indicators characterizing the country’s socio-economic development and reflecting the preparation of forecasts which are carried out based on economic- mathematical models.

 

Since, general equilibrium models as «AzMOD» considered one of the most appropriate tools with great potential particularly for fiscal policies. The finance ministries of the world's leading countries, as well as the Organization for Economic Cooperation and Development (OECD) and other reputable international organizations apply these models.

 


 

The main reason for the importance of application of «AzMOD» and general equilibrium models is that these models represent how the economy functions in reality, the behaviour of economic agents (natural persons and legal entities) and the government’s response to the changes made in taxes and subsidies. Without having an effective modeling instrument like «AzMOD», the government is incapable of evaluating the economy’s response to the changes in taxes and subsidies.

 

Taking into account the international experience, for the purpose of development a uniform platform on general equilibrium model (CGE) of the Republic of Azerbaijan, a special commission under the chairmanship of was established by the Order # F-115, dated October 4, 2010 of the Ministry of Economic Development (now: Ministry of Economy) «On development of a general equilibrium model for the analysis and forecasting of the socio-economic indicators and improvement of the activity of the Institute» and entrusted with the task of performing appropriate works.

In accordance with the execution of the order, the current status of the work performed by the relevant authorities in relation to preparation of analysis and forecasting of socioeconomic indicators in Azerbaijan using various economic models was examined and reported accordingly. Moreover, the international experience, including the experiences practiced in Kazakhstan, Turkey, Germany and other countries on the development of general equilibrium models (CGE) were reviewed and pertinent suggesstions made in this regard.

 

With the support of the Ministry of Economic Development since October 1, 2011, an agreement on the development of CGE was concluded between the Institute for Scientific Research on Economic Reforms (ISRER) and EcoMod Network contract signed between the company and for the development of GEM, the performance work under this Agreement with participation of local and foreign experts was completed. 

 

There are three principal research directions to be carried out - (i) development of a Social Accounting Matrix (SAM), (ii) development of software for analytical blocks of CGE and (iii) preparation of interface for the CGE users. In conclusion, of the work, trainings related to the development of modelling system in GAMS analytical database and GAMS (Generalized Algebraic Modelling System) software package conducted in November 2012.

 

Then, on December 26, 2012, a public presentation on the topic «General Equilibrium Model («AzMOD») of the Republic of Azerbaijan: the work performed, activities, findings and perspectives» held in Baku (Baku Business Center) with organizational support of the Institute to commuinicate this topic with the greater audience.

 



The presentation made with a special focus on «AzMOD» model covering 15 areas of socioeconomic sector (economic sectors):

 

1.     Agriculture, hunting and forest products

2.     Fish and other fishery products

3.     Products of the mining industry

4.     Processing industry

5.     Electricity, gas and water supply services

6.     Construction works

7.     Trade related services

8.     Hotel and restaurant (hospitality management) services

9.     Transport, Posts and Communications services

10.   Financial intermediation activities, insurance and pension services

11.   Real estate services, rental and other business services

12.   Public administration and defence, compulsory social security activities

13.   Education related services

14.   Health and social services

15.   Utilities and other services



 

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