ABSTRACT
This chapter examines the nature and dynamics of Azerbaijani-Turkish economic relations. It also examines whether there is a gap between the actual and potential levels of the bilateral economic relations. The chapter focuses on two dimensions of international economic relations that matter the most for economic growth: cross-border trade in goods and services and foreign direct investment (FDI). The chapter relies on three major sources in analysing bilateral economic relations between Turkey and Azerbaijan. First are interviews conducted with various experts to collect anecdotal evidence and learn their views on the actual and potential levels of bilateral economic relations. Second, draws on secondary literature to identify theoretical and empirical studies on what level of economic relations a pair of countries with ethnic and cultural affinity can have, despite disparities in the levels of economic development and institutional quality. Third, analyses actual data on bilateral economic relations between Turkey and Azerbaijan from a comparative perspective.
