Fakhri Javanshir Hasanov

• PHD., Associate Professor
• Senior Research Fellow at King Abdullah Petroleum Studies and Research Center

Obviously, fnancial development is one of the factors to consider in designing climate policies. We investigated the efects of fnancial development on CO2 emissions alongside income, total factor productivity, and international trade in Gulf Cooperation Council (GCC) countries. Ignoring common factors can lead to erroneous fndings and misleading...

Understanding the income/GDP and price elasticities of electricity demand is important for forecasting demand and evaluating the potential impact of energy/climate policies. Yet, there has been little work on this topic that focuses on countries outside the OECD. We employ a new database of cross-country real economy-wide electricity prices and app...

The Saudi Arabian economy heavily uses foreign labour and hence, ranks among the top countries not only in the Gulf Cooperation Council region, but also globally in terms of remittance outflows. This study develops a theoretical model to investigate the determinants of remittance outflows from Saudi Arabia. The cointegration and equilibrium correct...

To achieve sustainable economic growth, Saudi Vision 2030’s target is to improve Saudi Arabia’s ranking on the Global Competitiveness Index from 25 in 2015–2016 to within the top 10 by 2030. Saudi Arabia also aims to increase the share of non-oil exports in the non-oil GDP from 16% in 2016 to 50% by 2030. For policymakers to make informed decisions...

The role of financial development is vital in long-run economic growth. Due to the windfall revenues it might have extra relevance in natural resource-rich developing economies. This study explores whether financial development, measured in the percentage share of the bank loans to the private sector in GDP, can facilitate the impact of oil rents o...

Environmental issues, such as carbon dioxide (CO2) emissions, are humanity's most critical issues. Emissions released by oil-producing countries is not small. This is because these countries have an abundance of fossil fuels with considerably low prices, and the cost of using these natural sources to obtain energy is significantly cheaper than usin...

Overview CO2 emissions have been recognized globally threat for the humanity. To curb emissions, global and country-specific programs have been launched, such as the Kyoto protocol, the Paris agreement, and United Nation (UN) Sustainable Development Goals. Given its global importance, examining driving forces of CO2 is very crucial for any economy...

It is useful to provide a brief overview of the development stages of KGEMM, as these stages shaped the structure of the current version of the model. As mentioned previously, KGEMM has been developed to have a better representation of the Saudi Arabian economic (sectoral and macro) and energy relationships. The main motivation for developing it wa...

As mentioned earlier, MEMs are evaluated and validated using in-sample and out-of-sample simulations, and policy analysis, among other validation methods. In this section, we run KGEMM for in-sample forecasting and out-of-sample policy analysis to evaluate its predictive ability. Hasanov and Joutz (2013) provide an overview of the literature that c...

The objective of this book is to introduce the KAPSARC Global Energy Macroeconometric Model (KGEMM) and to conduct a detailed survey of the existing macroeconomic models for Saudi Arabia discussing their strengths and weaknesses. KGEMM is a policy analysis tool for examining the impacts of domestic policies and changes in global economy including e...

This chapter briefly describes the methodological framework KGEMM uses. KGEMM is a hybrid model, i.e., it brings together theoretical and empirical coherences at some degree. Put differently, KGEMM nests “theory-driven” and “data-driven” approaches as suggested by Hendry (2018), among others, and employed by modelers in building semi-structural mac...

This chapter reports the estimated long-run equations and identities in Sects. 7.1, 7.2, 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, and 7.9 while the estimated short-run equations, i.e., final ECM specifications associated with the long-run equations are reported in Appendix B to save space in the main text. Note that the long-run and ECM equations are estimate...

One of the heaviest resource-consuming tasks of KGEMM, as with all MEMs, is the collection, update, revision, and maintenance of data. In econometric modeling, data are the key elements in determining the statistical properties of relationships. In this regard, data availability plays an important role in establishing linkages between the variables...

In a very broad sense, KGEMM is a demand-side macroeconometric model augmented with several supply-side representations. The fifth version of KGEMM, presented in this book, has more supply-side augmentation compared to earlier versions. Welfe (2011) among others discuss that for macroeconometric models to be used for policy analysis and projections...

This paper determines whether road-fuel (gasoline plus diesel) income and price elasticities have changed over time in middle-income countries. To do so, the paper considers a balanced panel of 26 countries that spans 1990–2019. Also, the paper employs two methods that fully allow for cross-sectional heterogeneity, but vary to the extent that they...

This paper examines the relationship between oil market shocks and financial instability in Asian countries using a Structural Vector Autoregression (SVAR) following Kilian and Park’s (2009) methodology. Instability in the Asian financial markets is measured by the Financial Stress Index (FSI). Based on impulse response functions, the findings conf...

The Saudi agricultural sector relies on diesel for irrigation that is provided to farmers at a price much lower than the average global price, implying significant opportunity costs. By soft-coupling power and macroeconometric models, we assessed cost and economic (macro and sectoral) implications of electrifying irrigation activities in the Saudi...

The development of the agricultural sector is essential for any economy, including Azerbaijan, the largest economy in the South Caucasus, as it plays an important role in food security, rural development, and environmental protection. For Azerbaijan, as an oil-dependent economy, it is also important for diversification of the non-oil sector. For th...

This paper reviews earlier studies and shows that the money demand (MD) relationship under a fixed exchange rate (ER) regime differs from that under a floating ER regime, mainly due to the limited role of monetary policy in the former regime. It then empirically demonstrates that an open-economy model augmented with country-specific factors is a be...

Energy planning and climate policy require understanding long-run energy demand patterns. Electricity demand further is important because energy services derived from electricity typically do not have substitution possibilities from other fuels. By employing dynamic panel models, we estimate the long-run price and output elasticities of aggregate i...

The diversification of the economy including its exports is at the core of Saudi Vision 2030. The vision targets to raise non-oil export from 16% to 50% of non-oil GDP by 2030. Achieving this, in addition to other goals, necessitates a better understanding of the non-oil export relationship with its determinants. However, we are not aware of a stud...

This study aims to investigate the determinants of short- and long-run private investment behavior in Saudi Arabia for eight non-oil sectors. Saudi Arabia is currently proceeding with its Vision 2030 reform plan, which aims to significantly increase the private sector’s contribution to the country’s gross domestic product. Thus, analyzing private i...

Financial intermediation is one of the vital determinants of long-run economic growth. It might carry extra relevance in natural resource-rich developing economies, challenged by the long-term negative effects of windfall revenues, namely the resource curse. This study explores whether financial development can facilitate the role of oil rents in t...

Environmental issues, such as carbon dioxide (CO2) emissions, are humanity's most critical issues. Emissions released by oil-producing countries is not small. This is because these countries have an abundance of fossil fuels with considerably low prices, and the cost of using these natural sources to obtain energy is significantly cheaper than usin...

A vast number of studies have considered economic aspects of industrial energy consumption, whereas, to the best of our knowledge, very few studies have considered demographic aspects, and none of them provided a theoretical foundation for the demographic variables employed. Studying the effect of demographic factors on industrial energy consumptio...

This study contributes to the literature on energy demand by developing a theoretical framework, in which energy demand is a function of total factor productivity (TFP) alongside traditional factors such as price and income. The proposed theoretical framework is examined using annual data on energy consumption, TFP, income, and energy price for 49...

The development of the agricultural sector is essential in any economy, including Azerbaijan, as it plays an important role in food security, rural development, and environmental protection. For Azerbaijan, as an oil dependent economy, it is also important for diversification of the non-oil sector. For this reason, the Azerbaijani government has ad...

This paper examined the impact of fiscal policy on non-oil GDP in Saudi Arabia, the world’s largest oil exporter, over the annual period 1989–2018. We employed various cointegration methods within the framework of the augmented production function and estimated that government current and capital expenditure, in addition to non-oil labour and capit...

Extended Abstract. The diversification of the non-oil sector, including its exports, is at the core of Saudi Vision 2030. This study investigates Saudi non-oil exports in a novel way. Specifically, it differs from previous studies on this topic owing to its modeling framework. This study’s modeling framework first estimates the non-oil export equa...

Sectoral investment analysis for Saudi Arabia

This study aims to explore the impact of output and wage on labour demand in Saudi Arabia at sectoral level. We applied cointegration and equilibrium correction methods to the time-series data of 10 sectors over 1995-2016 using the demand side framework and considering the structural breaks in the data. We found that in the long run, the employment...

This paper contributes to the environmental literature by (i) demonstrating that the estimated coefficients and the statistical significance of the non-leading terms in quadratic, cubic, and quartic logarithmic environmental Kuznets curve (EKC) specifications are arbitrary and should therefore not be used to choose the preferred specification and (...

The development of the agricultural sector is essential in any economy, including Azerbaijan, as it plays an important role in food security, rural development, and environmental protection. For Azerbaijan, as an oil dependent economy, it is also important for diversification of the non-oil sector. For this reason, the Azerbaijani government has ad...

This paper contributes to the Environmental literature by i) demonstrating that the estimated coefficients and the statistical significance of the non-leading terms in quadratic, cubic, and quartic logarithmic Environmental Kuznets Curve EKC specifications are arbitrary and should therefore not be used to choose the preferred specification; and ii)...

This study develops a theoretical framework to quantify the impacts of technological progress, renewable energy consumption and international trade on carbon emissions (CO2), unlike many other studies that consider variables of interest in an ad hoc manner. The developed framework is then applied to the data from the BRICS countries for 1990–2017 p...

This study investigates the drivers of residential electricity demand in Saudi Arabia at a regional level for the period 1990–2018 using Structural Time Series Modeling. We find that Saudi Arabia's two waves of energy price reforms in 2016 and 2018 have had different impacts on residential electricity consumption across its regions. The empirical e...

A major challenge in implementing carbon pricing policies is to account for their economic outcomes. Notably, competitiveness is the key economic performance indicator to be considered. Extant theory mainly emphasizes the negative effect of carbon pricing on competitiveness; however, there is no consensus in the empirical literature. This may be du...

Aggregate residential electricity consumption in Saudi Arabia has increased rapidly over the past several decades, largely due to population increases and fast economic growth (SAMA 2019). The growth in electricity consumption has been driven, among other factors, by government-administered prices fixed in nominal terms for years with minor adjustm...

Saudi Arabia has been implementing the domestic energy price reform (EPR) and fiscal reform since the end of 2015 under the Fiscal Balance Program (FBP), one of the key realization programs of Saudi Vision 2030 (SV2030). The EPR aims to increase the rational consumption of energy and budget revenues by gradually removing energy incentives across th...

The paper investigates gasoline consumption in case of oil-exporting country applying Time-varying Coefficient Cointegration approach to the data from 1980 to 2017. Empirical estimations show that long-run income and price elasticities are not constant and are responsive to price and income fluctuations in the period considered. The income elastici...

The paper examines the electricity demand behavior for Saudi Arabia, using annual data for the period of 1990–2016, at regional level. The study finds that income, price and population are the main drivers of electricity demand at regional level. Although, the impacts vary across regions (central, eastern, southern and western), the estimated elast...

One of the most discussed topics of Environmental economics is the choice of the appropriate functional form to examine the income-environmental impact relationship. Since the developing economies encounter different development stages, the use of relevant specifications and techniques gains special importance to reveal the country-specific relatio...

In this paper, we revisit the theoretical framework for energy demand. We then use this theoretical framework to empirically model the Saudi Arabian industrial electricity demand. We show, in the case of Saudi Arabian data, that imposing parsimonious energy demand specification on data without testing relevant assumptions can lead to biased estimat...

The Saudi economy is going through a remarkable transformation process in light of Saudi Vision 2030, a masterplan of the Kingdom for future development to achieve more than 300 specific targets and about 80 large projects. This implies significant changes in the structures, proportions, and developments of the sectors of the economy. To better und...

Meeting the European Union's natural gas demand will require increasing volumes of imports in the foreseeable future. Recognizing the need to ensure uninterrupted and secure supplies of natural gas imports at all times, the European Union (EU) has actively sought to diversify its sources of supply, including obtaining natural gas from Azerbaijan th...

The objective of the research presented in this paper is to conduct a detailed survey of the existing macroeconomic models for Saudi Arabia and to introduce the KAPSARC Global Energy Macroeconometric Model (KGEMM). The the paper also considers the strengths and weaknesses of the earlier models. KGEMM is a policy analysis tool for examining the impa...

In this short note, we described step-by-step derivations of the industrial energy demand function from the production function framework and provided researchers with two specifications. Then we applied these theoretical specifications to the time series data as empirical analysis. We concluded that theories should be considered at the beginning o...

After the drop in international oil prices in 2014, oil-exporting countries started to launch new policies to develop their economies. It is important that policymakers involved in energy and economic development understand how economic agents respond to increased energy prices and how the latter affects the demand for different fuels. Saudi Arabia...

The government of Saudi Arabia has successfully reduced the country’s energy intensity, helped by its establishment of the Saudi Energy Efficiency Center (SEEC) and a series of energy price reforms (EPR) that began in 2016. However, how households have responded to the EPR is an important matter that warrants serious consideration. The Electricity...

The growth path of gasoline demand, a key strategic fuel, has important implications for oil security, oil-related carbon emissions, and refinery investment (Dahl 2012). As such, understanding how fluctuations in income and gasoline prices could affect the demand for oil in Saudi Arabia allows policymakers to assess what drives gasoline demand over...

The article Does CO2 emissions–economic growth relationship reveal EKC in developing countries? Evidence from Kazakhstan, written by Fakhri J. Hasanov, Jeyhun I.

In the original version of the book, the Chapter “How Total Factor Productivity Drives Long-Run Energy Consumption in Saudi Arabia” was not published under the open access category. The category has been changed. The erratum chapter and book have been updated.

The polynomial functional specification is widely used in environmental and ecological economics. When different powers of the same variable enter to the specification the elasticity of explained variable with respect to that variable should be obtained using the elasticity formula. Since, in this case the elasticity itself is a function, one need...

p>The paper theoretically derives a framework, which expresses energy demand as a function of Total Factor Productivity (TFP), employing optimization techniques. </p

p>The paper theoretically derives a framework, which expresses energy demand as a function of Total Factor Productivity (TFP), employing optimization techniques. </p

This paper investigates the CO2 emissions–economic growth relationship in Kazakhstan for the period 1992–2013. Johansen, ARDLBT, DOLS, FMOLS, and CCR cointegration methods are used for robustness purpose. We start with the cubic functional form to rule out any misleading results that can be caused by misspecification. Although the estimation result...

In this study, we investigate how total factor productivity (TFP), alongside income, price, and population, shapes energy consumption in the long-run in Saudi Arabia, the world’s number one oil exporter. To do so, we first estimate a production function and construct the associated TFP series, and then assess TFP’s impact on energy consumption. To...

In this study, we investigate how total factor productivity (TFP), alongside income, price, and population, shapes energy consumption in the long-run in Saudi Arabia, the world’s number one oil exporter. To do so, we first estimate a production function and construct the associated TFP series, and then assess TFP’s impact on energy consumption. To...

United States (U.S.) Iran energy sanction waivers expired May 2, 2019. The waivers permitted eight countries (China, Greece, India, Italy, Japan, South Korea, Taiwan, and Turkey) to temporarily continue buying oil from Iran. Based on KAPSARC modeling of the political decision-making process, this Instant Insight – the first such KAPSARC publication...

This study investigates the impact of social and physical infrastructure spending on the non-oil tradable and non-tradable sectors while controlling for non-oil capital stock and employment in the Azerbaijani economy for the period 1995-2014. The analysis employs the Engle-Granger and Phillips-Ouliaris cointegration tests using FMOLS estimation res...

This paper investigates the intergenerational welfare impact of raising administered retail energy prices in Saudi Arabia, an example of an oil-exporting country with a fast-growing population. To achieve this, we develop a dynamic model with overlapping generations (called MEGIR-SA), which we believe is the first empirical application of its type...

The relationship between CO 2 emissions, the main gas responsible for global warming, and economic growth is among the most studied themes of environmental economics. Reducing overall emissions while keeping a high pace of economic development is at the heart of the sustainable development concept. When emissions grow less rapidly than GDP environm...

This study develops a theoretical framework in which demographic and economic factors such as price and income can be seen to jointly determine industrial energy consumption. We select the population aged between 15-64 as the demographic variable. For a robustness check, we also consider those aged 15 and over in the analysis. The projections for...

Abstract Undoubtedly, oil price plays a great role in the macroeconomic performance of the oil-exporting developing countries. In this regard, exchange rate is one of the key macroeconomic indicators of these countries to investigate in the backdrop of oil price dynamics. The aim of our study is to examine the impact of the oil price on the exchang...

This study investigated bank-specific and macroeconomic determinants of bank profitability in Azerbaijan, an oil-dependent economy in transition. A huge drop in oil prices, a significant devaluation of the national currency, and the financial distress were the main motivations of the study. We applied Panel Generalized Method of Moments to the data...

While international trade and Carbon dioxide (CO2) emissions have been well-studied, a panel of only oil-exporting developing economies has not been considered. This paper addresses that gap by investigating the role of the trade in CO2 emissions using a panel of nine oil exporting countries. In addition, we examine the impacts of exports and impor...

This paper investigates the relationship between the economic growth and CO2 emissions in Azerbaijan. A cointegration analysis is conducted over the period 1992–2013. For getting more robust results, Johansen, ARDLBT, DOLS, FMOLS and CCR methods are employed to explore cointegration and estimate long-run coefficients. We use cubic, quadratic and li...

We investigate non-oil sector effects of fiscal policy in Azerbaijan over a long time period in which a recent low oil prices sample is incorporated. To obtain robust empirical findings, we use different test and estimation methods as well as address small-sample bias issues in the extended production function framework. Results show that fiscal po...

For Azerbaijan, Russia and Kazakhstan as Post-Soviet countries, oil exports are main revenues sources. These three resource rich countries implemented notable oil projects since independence and as a result acquired significant oil revenues. Due to major part of export goes to oil and relevant sectors; especially after 2000 these gained huge revenu...

We studied impacts of population groups of 15-64 and 65-above on residential electricity use in Kazakhstan in the STIRPAT framework. Unlike earlier studies for Kazakhstan in the STIRPAT framework, we applied time series cointegration and error correction methods. Results from the autoregressive distributed lags bounds testing approach indicate a si...

We studied impacts of population groups of 15–64 and 65–above on residential electricity use in Kazakhstan in the STIRPAT framework. Unlike earlier studies for Kazakhstan in the STIRPAT framework, we applied time series cointegration and error correction methods. Results from the autoregressive distributed lags bounds testing approach indicate a si...

Undoubtedly, oil price plays a great role in the macroeconomic performance of the oil-exporting developing countries. In this regard, exchange rate is one of the key macroeconomic indicators of these countries to investigate in the backdrop of oil price dynamics. The aim of our study is to examine the impact of the oil price on the exchange rate of...

Recent literature has shown that electricity demand elasticities may not be constant over time and this has investigated using time-varying estimation methods. As accurate modeling of electricity demand is very important in Azerbaijan, which is a transitional country facing significant change in its economic outlook, we analyze whether the response...

In this study, we examined the impacts of population age groups of 15-64 and 65-above on residential electricity consumption in Azerbaijan within the STIRPAT framework. Unlike many prior studies of STIRPAT framework, we analyzed this impact, employing co-integration and error correction method in order to rule out possible spurious estimation resul...

The paper examines the energy-growth nexus in ten oil-exporting developing Eurasian countries: Azerbaijan, Bahrain, Iran, Kazakhstan, Kuwait, Oman, Qatar, Russia, Saudi Arabia and the UAE over the period 1997–2014. Lack of enough energy-growth nexus studies on the oil exporters of the Middle East and Commonwealth of Independent States coupled with...

Azerbaycan genel anlamda dışa açık yükselen bir ekonomi olarak değerlendirilebilir. Üstelik petrol üreten ve ihraç eden bir ekonomi olarak son yıllarda ciddi bir büyüme sürecine girmiştir. İncelenen dönemde enerji talebinin her geçen gün artması, kilit bir enerji kaynağı olan petrolün fiyatını arttırmakta, buna bağlı olarak Azerbaycan gibi petrol i...

Undoubtedly, oil prices play a crucial role in the macroeconomic performances of oil-exporting developing countries. In this regard, the exchange rate is one of the key macroeconomic indicators worthy of investigation. Existing literature shows that world oil prices play an important role in the appreciation of the exchange rates of oil-exporting d...

This paper discusses that the revenues from the oil exports are main part of total revenues in Azerbaijan, Kazakhstan and Russia, the former Soviet Union countries. These resource rich countries have implemented notable oil projects by involving foreign oil companies since independence and made significant oil revenues. The major part of these oil...

Undoubtedly, oil prices play a crucial role in themacroeconomic performances of oil-exporting developing countries. In this regard, the exchange rate is one of the key macroeconomic indicators worthy of investigation. Existing literature shows that world oil prices play an important role in the appreciation of the exchange rates of oil-exporting de...