Financial Integration in a Transition Economy: Evidence from Azerbaijan Using ARDL and VAR Approaches

2026-01-15T11:16:56+00:00

This study examines the degree and dynamics of Azerbaijan’s financial integration with global financial markets within a comprehensive theoretical and empirical framework. Building on classical theories of economic integration and contemporary literature on financial market integration, the paper conceptualizes integration as a gradual, multidimensional, and institutionally conditioned process rather than a binary outcome. Using time-series data from official national and international sources, the analysis employs a combined autoregressive distributed lag (ARDL) and vector autoregression (VAR) approach to capture both long-run equilibrium relationships and short-run dynamic interactions among key macro-financial variables. The empirical results provide robust evidence of long-run cointegration between Azerbaijan’s domestic financial indicators and global financial variables, indicating the existence of structural financial linkages. However, the magnitude of estimated coefficients and the speed of adjustment reveal a moderate and partial level of integration. Exchange rate dynamics emerge as the primary transmission channel of global financial conditions, while interest rate linkages remain comparatively weak. Short-run dynamics further show that external financial shocks propagate through the system in a controlled and non-disruptive manner. The study contributes empirical evidence from a transition economy and offers policy-relevant insights on balancing financial openness, stability, and market development.

Proxying the Invisible: Estimating Transnistria’s Shadow Economy and Its Threats to Regional Economic Security

2026-01-20T09:16:23+00:00

This paper explores the shadow economy in Transnistria and its implications for Moldova’s economic security. As an unrecognized and semi-autonomous region, Transnistria operates largely outside Moldova’s formal regulatory and fiscal systems, fostering informal and semi-legal economic practices. Conventional estimation methods, such as the Currency Demand Approach (CDA), cannot be applied due to the lack of reliable monetary and macroeconomic data. To address this limitation, a population-intensity proxy model is used, drawing on Moldova’s national shadow economy estimates (42.8 % of GDP in 2020; 37.1 % in 2025) and adjusting for Transnistria’s population share and higher informal intensity. Results suggest that informal activity may range from 1.7 % to 3.4 % of Moldova’s GDP in 2020 and 1.5 % to 3.0 % in 2025. The analysis indicates that informal practices are concentrated in fuel, metals, alcohol, and tobacco trade, and are partly facilitated by Russian patronage reflecting the structural embedding of informality in governance arrangements, highlighting the intersection of contested sovereignty, institutional fragility, and external influence. By integrating proxy estimation with qualitative insights, this research illuminates how shadow economies in unrecognized territories reshape governance, distort trade, and pose systemic economic security risks.

The Journal of Accounting and Management

Financial Integration in a Transition Economy: Evidence from Azerbaijan Using ARDL and VAR Approaches

Proxying the Invisible: Estimating Transnistria’s Shadow Economy and Its Threats to Regional Economic Security